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Financial Statements

2014
Consolidated Financial Statements
of the Nestl Group 2014
148th Financial Statements
of Nestl S.A.

Consolidated
Financial Statements
of the Nestl Group 2014

57

Principal exchange rates

58

Consolidated income statement for the year ended 31 December 2014

59

Consolidated statement of comprehensive income for the year ended 31 December 2014

60

Consolidated balance sheet as at 31 December 2014

62

Consolidated cash flow statement for the year ended 31 December 2014

63

Consolidated statement of changes in equity for the year ended 31 December 2014

65

Notes
1. Accounting policies
2. Acquisitions and disposals of businesses
3. Analyses by segment
4. Net other trading and operating income/(expenses)
5. Net financial income/(expense)
6. Inventories
7. Trade and other receivables
8. Property, plant and equipment
9. Goodwill and intangible assets
10. Employee benefits
11. Equity compensation plans
12. Provisions and contingencies
13. Financial instruments
14. Taxes
15. Associates and joint ventures
16. Earnings per share
17. Cash flow statement
18. Equity
19. Lease commitments
20. Transactions with related parties
21. Guarantees
22. Group risk management
23. Group exposure in Venezuela
24. Events after the balance sheet date
25. Group companies

65
75
78
83
84

86
88
92
100
102
104
113
115
117
120
123
124
125
127

56

128

Report of the Statutory Auditor on the Consolidated Financial Statements

130

Financial information 5 year review

132

Companies of the Nestl Group

Consolidated Financial Statements of the Nestl Group 2014

Principal exchange rates

CHF per
2014

2013

Year ending rates

2014

2013

Weighted average annual rates

1 US Dollar

USD

0.990

0.890

0.916

1 Euro

EUR

1.203

1.226

1.215

1.231

100 Chinese Yuan Renminbi

CNY

15.957

14.699

14.875

15.065

100 Brazilian Reais

BRL

37.262

37.986

38.898

42.994

1 Pound Sterling

GBP

1.540

1.471

1.508

1.450

100 Mexican Pesos

MXN

6.716

6.808

6.885

7.262

100 Philippine Pesos

PHP

2.208

2.004

2.062

2.184

1 Canadian Dollar

CAD

0.852

0.836

0.830

0.899

1 Russian Ruble

RUB

0.017

0.027

0.024

0.029

1 Australian Dollar

AUD

0.810

0.794

0.826

0.896

100 Japanese Yen

JPY

0.827

0.847

0.862

0.944

Consolidated Financial Statements of the Nestl Group 2014

0.927

57

Consolidated income statement


for the year ended 31 December 2014

In millions of CHF
Sales

Notes

2014

2013

91 612

92 158

Other revenue

253

Cost of goods sold

(47 553)

Distribution expenses
Marketing and administration expenses
Research and development costs

215
(48 111)

(8 217)

(8 156)

(19 651)

(19 711)

(1 628)

(1 503)

Other trading income

110

120

Other trading expenses

(907)

(965)

Trading operating profit

Other operating income

Other operating expenses

Operating profit

14 019
154
(3 268)
10 905

14 047
616
(1 595)
13 068

Financial income

135

219

Financial expense

(772)

(850)

Profit before taxes, associates and joint ventures

10 268

12 437

Taxes

14

(3 367)

Income from associates and joint ventures

15

8 003

1 264

14 904

10 445

Profit for the year


of which attributable to non-controlling interests

(3 256)

448

430

14 456

10 015

Trading operating profit

15.3%

15.2%

Profit for the year attributable to shareholders of the parent (Net profit)

15.8%

10.9%

of which attributable to shareholders of the parent (Net profit)


As percentages of sales

Earnings per share (in CHF)


Basic earnings per share

16

4.54

3.14

Diluted earnings per share

16

4.52

3.13

58

Consolidated Financial Statements of the Nestl Group 2014

Consolidated statement of comprehensive income


for the year ended 31 December 2014

In millions of CHF
Notes

Profit for the year recognised in the income statement

2014

2013

14 904

10 445

Currency retranslations
Recognised in translation reserve

2 660

Reclassified from translation reserve to income statement

1 003

(3 160)
214

Fair value adjustments on available-for-sale financial instruments


Recognised in fair value reserve

191

Reclassified from fair value reserve to income statement

(4)

(532)

Recognised in hedging reserve

31

161

Reclassified from hedging reserve

(87)

85

290

83

40

Fair value adjustments on cash flow hedges

Taxes

14

Share of other comprehensive income of associates and joint ventures

15

Recognised in the reserves


Reclassified from the reserves

(436)

Items that are or may be reclassified subsequently to the income statement

3 446

(2 893)

(1 745)

1 632

Remeasurement of defined benefit plans

10

Taxes

14

352

Share of other comprehensive income of associates and joint ventures

15

(153)

47

(1 546)

831

Items that will never be reclassified to the income statement


Other comprehensive income for the year
Total comprehensive income for the year
of which attributable to non-controlling interests
of which attributable to shareholders of the parent

Consolidated Financial Statements of the Nestl Group 2014

18

1 900
16 804

(848)

(2 062)
8 383

556

371

16 248

8 012

59

Consolidated balance sheet


as at 31 December 2014
before appropriations
In millions of CHF
Notes

2014

2013

13/17

7 448

6 415

13

1 433

638

9 172

8 382

7/13

13 459

12 206

565

762

Assets
Current assets
Cash and cash equivalents
Short-term investments
Inventories
Trade and other receivables
Prepayments and accrued income
Derivative assets

13

Current income tax assets


Assets held for sale

Total current assets

400

230

908

1 151

576

282

33 961

30 066

Non-current assets
Property, plant and equipment

28 421

26 895

Goodwill

34 557

31 039

Intangible assets

19 800

12 673

Investments in associates and joint ventures

15

8 649

12 315

Financial assets

13

5 493

4 550

Employee benefits assets

10

383

537

Current income tax assets


Deferred tax assets
Total non-current assets
Total assets

60

14

128

124

2 058

2 243

99 489

90 376

133 450

120 442

Consolidated Financial Statements of the Nestl Group 2014

Consolidated balance sheet as at 31 December 2014

In millions of CHF
Notes

2014

2013

Liabilities and equity


Current liabilities
Financial debt

13

8 810

11 380

Trade and other payables

13

17 437

16 072

3 759

3 185
523

Accruals and deferred income


Provisions

12

695

Derivative liabilities

13

757

381

1 264

1 276

Current income tax liabilities


Liabilities directly associated with assets held for sale

Total current liabilities

173

100

32 895

32 917

Non-current liabilities
Financial debt

13

12 396

10 363

Employee benefits liabilities

10

8 081

6 279

Provisions

12

3 161

2 714

Deferred tax liabilities

14

3 191

2 643

Other payables

13

1 842

1 387

Total non-current liabilities

28 671

23 386

Total liabilities

61 566

56 303

Equity
Share capital
Treasury shares

18

322

322

(3 918)

(2 196)

Translation reserve

(17 255)

(20 811)

Retained earnings and other reserves

90 981

85 260

Total equity attributable to shareholders of the parent

70 130

62 575

Non-controlling interests
Total equity
Total liabilities and equity

Consolidated Financial Statements of the Nestl Group 2014

1 754

1 564

71 884

64 139

133 450

120 442

61

Consolidated cash flow statement


for the year ended 31 December 2014

In millions of CHF
Notes

2014

2013

Operating profit

17

10 905

13 068

Non-cash items of income and expense

17

6 323

4 352

17 228

17 420

Operating activities

Cash flow before changes in operating assets and liabilities


Decrease/(increase) in working capital

17

Variation of other operating assets and liabilities

17

Cash generated from operations


Net cash flows from treasury activities

85
17 199

17

Taxes paid
Dividends and interest from associates and joint ventures

(114)

(574)
18 206

(356)

(351)

(2 859)

(3 520)

716

657

14 700

14 992

15

Operating cash flow

1 360

Investing activities
Capital expenditure

(3 914)

(4 928)

Expenditure on intangible assets

(509)

(402)

Acquisition of businesses

(1 986)

(321)

Disposal of businesses

321

15

3 958

Investments (net of divestments) in associates and joint ventures (a)


Outflows from non-current treasury investments

(137)

Inflows from non-current treasury investments

255

Inflows/(outflows) from short-term treasury investments

(962)

Inflows from other investing activities (b)

294

Outflows from other investing activities


Cash flow from investing activities

421
(28)
(244)
2 644
400
1 273

(392)

(421)

(3 072)

(1 606)

(6 863)

(6 552)

(356)

(328)

(49)

(337)

(1 721)

(481)

Financing activities
Dividend paid to shareholders of the parent
Dividends paid to non-controlling interests

18

Acquisition (net of disposal) of non-controlling interests


Purchase of treasury shares
Sale of treasury shares

104

60

2 202

3 814

Outflows from bonds and other non-current financial debt

(1 969)

(2 271)

Inflows/(outflows) from current financial debt

(1 985)

(6 063)

(10 637)

(12 158)

Inflows from bonds and other non-current financial debt

Cash flow from financing activities


Currency retranslations
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

42
1 033

(526)
702

6 415

5 713

7 448

6 415

(a) Mainly relates to the partial disposal of LOral shares. The Group sold part of its shares to LOral for a price of CHF 7342 million (see Note 15)
in exchange for the remaining 50% stake in Galderma for an equity value of CHF 3201 million (see Note 2) and cash of CHF 4141 million.
(b) In 2013 mainly relates to the disposal of Givaudan shares.

62

Consolidated Financial Statements of the Nestl Group 2014

Consolidated statement of changes in equity


for the year ended 31 December 2014

Translation
reserve

Retained
earnings and
other reserves

Total equity
attributable to
shareholders
of the parent

Non-controlling
interests

Total
equity

(2 078)

(17 924)

80 687

61 007

1 657

62 664

10 015

10 015

430

10 445

(2 887)

884

(2 887)

Dividend paid to shareholders of the parent

Dividends paid to non-controlling interests

Movement of treasury shares

Equity compensation plans

Share
capital

Treasury
shares

In millions of CHF

322

Profit for the year

Other comprehensive income for the year

Total comprehensive income for the year

Equity as at 31 December 2012

(2 003)

(59)

(2 062)

10 899

8 012

371

8 383

(6 552)

(6 552)

(612)

190

214

Other transactions settled with treasury shares (a)

280

Changes in non-controlling interests

Total transactions with owners


Other movements (b)

(6 552)

(328)

(328)

(422)

(422)

(39)

175

175

280

(297)

(297)

(136)

(433)

(118)

(6 698)

(6 816)

(464)

(7 280)

372

372

372

322

(2 196)

(20 811)

85 260

62 575

1 564

64 139

Profit for the year

14 456

14 456

448

14 904

Other comprehensive income for the year

3 556

(1 764)

1 792

108

1 900

Total comprehensive income for the year

3 556

12 692

16 248

556

16 804

Dividend paid to shareholders of the parent

(6 863)

Dividends paid to non-controlling interests

Movement of treasury shares

(1 943)

204

Equity compensation plans

221

(48)

173

173

Changes in non-controlling interests

(297)

(297)

(10)

(307)

Total transactions with owners

(1 722)

(7 004)

(8 726)

(366)

(9 092)

Other movements

33

33

33

322

(3 918)

(17 255)

90 981

70 130

1 754

71 884

Equity as at 31 December 2013

Equity as at 31 December 2014

(6 863)

(1 739)

280

(6 863)

(356)

(356)

(1 739)

(a) The other transactions relate to the acquisition of a business (see Note 2).
(b) Relates mainly to the adjustment for hyperinflation in Venezuela, considered as a hyperinflationary economy.

Consolidated Financial Statements of the Nestl Group 2014

63

64

Consolidated Financial Statements of the Nestl Group 2014

Notes

1. Accounting policies
Accounting convention and accounting standards
The Consolidated Financial Statements comply with
International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB)
and with Swiss law.
They have been prepared on an accrual basis and under
the historical cost convention, unless stated otherwise. All
significant consolidated companies, joint arrangements and
associates have a 31December accounting year-end.
The Consolidated Financial Statements 2014 were approved
for issue by the Board of Directors on 18 February 2015 and
are subject to approval by the Annual General Meeting on
16April 2015.
Key accounting judgements, estimates and
assumptions
The preparation of the Consolidated Financial Statements
requires Group Management to exercise judgement and to
make estimates and assumptions that affect the application
of policies, reported amounts of revenues, expenses, assets
and liabilities and disclosures. These estimates and associated
assumptions are based on historical experience and various
other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if
the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current
and future periods. Those areas affect mainly provisions and
contingencies (see Note 12), goodwill impairment tests (see
Note 9), employee benefits (see Note 10), allowance for
doubtful receivables (see Note 7), taxes (see Note 14) and
hyperinflation (see Note 23).
Scope of consolidation
The Consolidated Financial Statements comprise those
ofNestlS.A. and of its affiliated companies, including joint
arrangements and associates (the Group). The list of the
principal companies is provided in the section Companies
of the Nestl Group.

Consolidated Financial Statements of the Nestl Group 2014

Consolidated companies
Companies, in which the Group has the power to exercise
control, are fully consolidated. This applies irrespective of
the percentage of interest in the share capital. The Group
controls a company when it is exposed to, or has rights to,
variable returns from its involvement with the company and
has the ability to affect those returns through its power over
the company. Non-controlling interests are shown as
a component of equity in the balance sheet and the share
of the profit attributable to non-controlling interests is shown
as a component of profit for the year in the income statement.
Newly acquired companies are consolidated from the
effective date of control, using the acquisition method.
Joint arrangements
Joint arrangements are contractual arrangements over which
the Group exercises joint control with partners.
Joint ventures
Joint arrangements whereby the parties have rights to the
net assets of the arrangement are joint ventures and are
accounted for using the equity method.
Joint operations
The joint arrangements where the parties control the rights
to the assets and obligations for the liabilities are joint
operations and the individual assets, liabilities, income and
expenses are consolidated in proportion to the Groups
contractually specified share (usually 50%).
Associates
Companies where the Group has the power to exercise
a significant influence but does not exercise control are
accounted for using the equity method. The net assets and
results are adjusted to comply with the Groups accounting
policies. The carrying amount of goodwill arising from the
acquisition of associates is included in the carrying amount
of investments in associates.
Foreign currencies
The functional currency of the Groups entities is the currency
of their primary economic environment.
In individual companies, transactions in foreign currencies
are recorded at the rate of exchange at the date of the
65

1. Accounting policies

transaction. Monetary assets and liabilities in foreign


currencies are translated at year-end rates. Any resulting
exchange differences are taken to the income statement,
except when deferred in other comprehensive income as
qualifying cash flow hedges.
On consolidation, assets and liabilities of Group entities
reported in their functional currencies are translated into
Swiss Francs, the Groups presentation currency, at year-end
exchange rates. Income and expense are translated into Swiss
Francs at the annual weighted average rates of exchange or
at the rate on the date of the transaction for significant items.
Differences arising from the retranslation of opening net
assets of Group entities, together with differences arising
from the restatement of the net results for the year of Group
entities, are recognised in other comprehensive income.
The balance sheet and net results of Group entities
operating in hyperinflationary economies are restated for
the changes in the general purchasing power of the local
currency, using official indices at the balance sheet date,
before translation into Swiss Francs.
When there is a change of control in a foreign entity,
exchange differences that were recorded in equity are
recognised in the income statement as part of the gain
or loss on disposal.
Segment reporting
Operating segments reflect the Groups management
structure and the way financial information is regularly
reviewed by the Groups chief operating decision maker
(CODM), which is defined as the Executive Board.
The CODM considers the business from both a geographic
and product perspective, through three geographic Zones
and several Globally Managed Businesses (GMB). Zones and
GMB that meet the quantitative threshold of 10% of sales,
trading operating profit or assets, are presented on a standalone basis as reportable segments. Other business activities
and operating segments, including GMB that do not meet
the threshold, like Nestl Professional, Nespresso, Nestl
Health Science and Nestl Skin Health, are combined and
presented in Other businesses. Therefore, the Groups
reportable operating segments are:
Zone Europe;
Zone Americas;
Zone Asia, Oceania and Africa;
Nestl Waters;
Nestl Nutrition;
Other businesses.
As some operating segments represent geographic Zones,
information by product is also disclosed. The seven product
groups that are disclosed represent the highest categories
of products that are followed internally.
66

Finally, the Group provides information attributed to the


country of domicile of the Groups parent company (NestlS.A.
Switzerland) and to the ten most important countries in
terms of sales.
Segment results represent the contribution of the different
segments to central overheads, research and development
costs and the trading operating profit of the Group. Specific
corporate expenses as well as specific research and
development costs are allocated to the corresponding
segments.
Segment assets and liabilities are aligned with internal
reported information to the CODM. Segment assets comprise
property, plant and equipment, intangible assets, goodwill,
trade and other receivables, assets held for sale, inventories,
prepayments and accrued income as well as specific financial
assets associated to the reportable segments. Segment
liabilities comprise trade and other payables, liabilities directly
associated with assets held for sale, some other payables
as well as accruals and deferred income. Eliminations
represent inter-company balances between the different
segments.
Segment assets by operating segment represent the
situation at the end of the year. Assets and liabilities by
product represent the annual average, as this provides
a better indication of the level of invested capital for
management purposes.
Capital additions represent the total cost incurred to
acquire property, plant and equipment, intangible assets
and goodwill, including those arising from business
combinations. Capital expenditure represents the investment
in property, plant and equipment only.
Depreciation of segment assets includes depreciation
of property, plant and equipment and amortisation of
intangible assets. Impairment of assets includes impairment
related to property, plant and equipment, intangible assets
and goodwill.
Unallocated items represent non-specific items whose
allocation to a segment would be arbitrary. They mainly
comprise:
corporate expenses and related assets/liabilities;
research and development costs and related assets/
liabilities; and
some goodwill and intangible assets.
Non-current assets by geography include property, plant
and equipment, intangible assets and goodwill that are
attributable to the ten most important countries and the
country of domicile of Nestl S.A.

Consolidated Financial Statements of the Nestl Group 2014

1. Accounting policies

Valuation methods, presentation and definitions


Revenue
Sales represent amounts received and receivable from third
parties for goods supplied to the customers and for services
rendered. Revenue from the sales of goods is recognised in
the income statement at the moment when the significant
risks and rewards of ownership of the goods have been
transferred to the buyer, which is mainly upon shipment.
It is measured at the list price applicable to a given distribution
channel after deduction of returns, sales taxes, pricing
allowances, other trade discounts and couponing and price
promotions to consumers. Payments made to the customers
for commercial services received are expensed.
Other revenue is primarily license fees from third parties
which have been earned during the period.
Expenses
Cost of goods sold is determined on the basis of the cost
of production or of purchase, adjusted for the variation of
inventories. All other expenses, including those in respect
of advertising and promotions, are recognised when the
Group receives the risks and rewards of ownership of the
goods or when it receives the services.
Other trading income/(expenses)
These comprise restructuring costs, impairment of property,
plant and equipment and intangible assets, litigations and
onerous contracts, result on disposal of property, plant and
equipment, and specific other income and expenses that fall
within the control of operating segments.
Restructuring costs are restricted to dismissal indemnities
and employee benefits paid to terminated employees upon
the reorganisation of a business. Dismissal indemnities paid
for normal attrition such as poor performance, professional
misconduct, etc. are part of the expenses by functions.
Other operating income/(expenses)
These comprise impairment of goodwill, results on disposals
of businesses (including impairment and subsequent
remeasurement of businesses classified as held for sale),
acquisition-related costs, the effect of the hyperinflation
accounting and other income and expenses that fall beyond
the control of operating segments and relate to events such
as natural disasters and expropriation of assets.
Net financial income/(expense)
Net financial income/(expense) includes net financing cost
and net interest income/(expense) on defined benefit plans.
Net financing cost includes the interest expense on
borrowings from third parties as well as the interest income
earned on funds invested outside the Group. This heading
Consolidated Financial Statements of the Nestl Group 2014

also includes other financing related income and expense,


such as exchange differences on loans and borrowings,
results on foreign currency and interest rate hedging
instruments that are recognised in the income statement.
Certain borrowing costs are capitalised as explained under
the section on Property, plant and equipment. Others are
expensed.
Taxes
The Group is subject to taxes in different countries all over the
world. Taxes and fiscal risks recognised in the Consolidated
Financial Statements reflect Group Managements best
estimate of the outcome based on the facts known at the
balance sheet date in each individual country. These facts
may include but are not limited to change in tax laws and
interpretation thereof in the various jurisdictions where the
Group operates. They may have an impact on the income tax
as well as the resulting assets and liabilities. Any differences
between tax estimates and final tax assessments are charged
to the income statement in the period in which they are
incurred, unless anticipated.
Taxes include current taxes on profit as well as actual or
potential withholding taxes on current and expected transfers
of income from Group companies and tax adjustments
relating to prior years. Income tax is recognised in the income
statement, except to the extent that it relates to items directly
taken to equity or other comprehensive income, in which
case it is recognised against equity or other comprehensive
income.
Deferred taxation is the tax attributable to the temporary
differences that arise when taxation authorities recognise
and measure assets and liabilities with rules that differ from
the principles of the Consolidated Financial Statements.
It also arises on temporary differences stemming from tax
losses carried forward.
Deferred taxes are calculated under the liability method
at the rates of tax expected to prevail when the temporary
differences reverse subject to such rates being substantially
enacted at the balance sheet date. Any changes of the tax
rates are recognised in the income statement unless related
to items directly recognised against equity or other
comprehensive income. Deferred tax liabilities are recognised
on all taxable temporary differences excluding non-deductible
goodwill. Deferred tax assets are recognised on all deductible
temporary differences provided that it is probable that future
taxable income will be available.
Income from associates and joint ventures and the share
of other comprehensive income of associates and joint
ventures are shown net of tax effects.

67

1. Accounting policies

Financial instruments
Classes of financial instruments
The Group aggregates its financial instruments into classes
based on their nature and characteristics. The details of
financial instruments by class are disclosed in the notes.
Financial assets
Financial assets are initially recognised at fair value plus
directly attributable transaction costs. However when
a financial asset at fair value to income statement is
recognised, the transaction costs are expensed immediately.
Subsequent remeasurement of financial assets is determined
by their categorisation that is revisited at each reporting date.
Derivatives embedded in other contracts are separated
and treated as stand-alone derivatives when their risks and
characteristics are not closely related to those of their host
contracts and the respective host contracts are not carried
at fair value.
In case of regular-way purchase or sale (purchase or sale
under a contract whose terms require delivery within the
time frame established by regulation or convention in the
market place), the settlement date is used for both initial
recognition and subsequent derecognition.
At each balance sheet date, the Group assesses whether
its financial assets are to be impaired. Impairment losses are
recognised in the income statement where there is objective
evidence of impairment, such as where the issuer is in
bankruptcy, default or other significant financial difficulty.
In addition, for an investment in an equity security,
a significant or prolonged decline in its fair value below its
cost is objective evidence of impairment. Impairment losses
are reversed when the reversal can be objectively related to
an event occurring after the recognition of the impairment
loss. For debt instruments measured at amortised cost or
fair value, the reversal is recognised in the income statement.
For equity instruments classified as available for sale, the
reversal is recognised in other comprehensive income.
Impairment losses on financial assets carried at cost because
their fair value cannot be reliably measured are never
reversed.
Financial assets are derecognised (in full or partly) when
substantially all the Groups rights to cash flows from the
respective assets have expired or have been transferred and
the Group has neither exposure to substantially all the risks
inherent in those assets nor entitlement to rewards from them.
The Group classifies its financial assets into the following
categories: loans and receivables, financial assets designated
at fair value through income statement, held-for-trading and
available-for-sale assets.

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Loans and receivables


Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. This category includes the following
classes of financial assets: loans; trade and other receivables
and cash at bank and in hand.
Subsequent to initial measurement, loans and receivables
are carried at amortised cost using the effective interest rate
method less appropriate allowances for doubtful receivables.
Allowances for doubtful receivables represent the Groups
estimates of losses that could arise from the failure or inability
of customers to make payments when due. These estimates
are based on the ageing of customers balances, specific
credit circumstances and the Groups historical bad
receivables experience.
Loans and receivables are further classified as current
and non-current depending whether these will be realised
within twelve months after the balance sheet date or beyond.
Financial assets designated at fair value through
income statement
Certain investments are designated at fair value through
the income statement because this reduces an accounting
mismatch which would otherwise arise due to the
remeasurement of certain liabilities using current market
prices as inputs.
Held-for-trading assets
Held-for-trading assets are derivative financial instruments.
Subsequent to initial measurement, held-for-trading assets
are carried at fair value and all their gains and losses, realised
and unrealised, are recognised in the income statement.
Available-for-sale assets
Available-for-sale assets are those non-derivative financial
assets that are either designated as such upon initial
recognition or are not classified in any of the other financial
assets categories. This category includes the following
classes of financial assets: bonds, equities, commercial
paper, time deposits and other investments. They are
included in non-current financial assets unless an investment
matures or management intends to dispose of it within
12 months of the end of the reporting period. In that case
it would be accounted for as short-term investments, or
cash and cash equivalents, as appropriate.
Subsequent to initial measurement, available-for-sale
assets are stated at fair value with all unrealised gains or
losses recognised against other comprehensive income
until their disposal when such gains or losses are recognised
in the income statement.

Consolidated Financial Statements of the Nestl Group 2014

1. Accounting policies

Interest earned on available-for-sale assets is calculated


using the effective interest rate method and is recognised
in the income statement.
Financial liabilities at amortised cost
Financial liabilities are initially recognised at the fair value of
consideration received less directly attributable transaction
costs.
Subsequent to initial measurement, financial liabilities are
recognised at amortised cost unless they are part of a fair
value hedge relationship (refer to fair value hedges). The
difference between the initial carrying amount of the financial
liabilities and their redemption value is recognised in the
income statement over the contractual terms using the
effective interest rate method. This category includes the
following classes of financial liabilities: trade and other
payables; commercial paper; bonds and other financial
liabilities.
Financial liabilities at amortised cost are further classified
as current and non-current depending whether these will fall
due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognised (in full or partly)
when either the Group is discharged from its obligation,
they expire, are cancelled or replaced by a new liability with
substantially modified terms.
Derivative financial instruments
A derivative is a financial instrument that changes its values
in response to changes in the underlying variable, requires
no or little net initial investment and is settled at a future
date. Derivatives are mainly used to manage exposures to
foreign exchange, interest rate and commodity price risk.
Derivatives are initially recognised at fair value. They are
subsequently remeasured at fair value on a regular basis and
at each reporting date as a minimum. The fair values of
exchange-traded derivatives are based on market prices,
while the fair value of the over-the-counter derivatives are
determined using accepted mathematical models based on
market data.
Derivatives are carried as assets when their fair value is
positive and as liabilities when their fair value is negative.
The Groups derivatives mainly consist of currency
forwards, futures, options and swaps; commodity futures
and options; interest rate forwards, futures, options and
swaps.
Hedge accounting
The Group designates and documents certain derivatives
as hedging instruments against changes in fair values of
recognised assets and liabilities (fair value hedges), highly
probable forecast transactions (cash flow hedges) and
Consolidated Financial Statements of the Nestl Group 2014

hedges of net investments in foreign operations (net


investment hedges). The effectiveness of such hedges is
assessed at inception and verified at regular intervals and
at least on a quarterly basis, using prospective and
retrospective testing.
Fair value hedges
The Group uses fair value hedges to mitigate foreign currency
and interest rate risks of its recognised assets and liabilities.
The changes in fair values of hedging instruments are
recognised in the income statement. Hedged items are also
adjusted for the risk being hedged, with any gain or loss
being recognised in the income statement.
Cash flow hedges
The Group uses cash flow hedges to mitigate a particular
risk associated with a recognised asset or liability or highly
probable forecast transactions, such as anticipated future
export sales, purchases of equipment and raw materials,
as well as the variability of expected interest payments and
receipts.
The effective part of the changes in fair value of hedging
instruments is recognised in other comprehensive income,
while any ineffective part is recognised immediately in the
income statement. When the hedged item results in the
recognition of a non-financial asset or liability, including
acquired businesses, the gains or losses previously
recognised in other comprehensive income are included in
the measurement of the cost of the asset or of the liability.
Otherwise the gains or losses previously recognised in
other comprehensive income are removed and recognised
in the income statement at the same time as the hedged
transaction.
Net investment hedges
The Group uses net investment hedges to mitigate
translation exposure on its net investments in affiliated
companies.
The changes in fair values of hedging instruments are
taken directly to other comprehensive income together with
gains or losses on the foreign currency translation of the
hedged investments. All of these fair value gains or losses
are deferred in equity until the investments are sold or
otherwise disposed of.
Undesignated derivatives
Undesignated derivatives are comprised of two categories.
The first includes derivatives acquired in the frame of risk
management policies for which hedge accounting is not
applied. The second category relates to derivatives that are

69

1. Accounting policies

acquired with the aim of delivering performance over agreed


benchmarks.
Subsequent to initial measurement, undesignated
derivatives are carried at fair value and all their gains and
losses, realised and unrealised, are recognised in the
income statement.
Fair value
The Group determines the fair value of its financial
instruments on the basis of the following hierarchy:
i) The fair value of financial instruments quoted in active
markets is based on their quoted closing price at the
balance sheet date. Examples include commodity
derivative assets and liabilities and other financial assets
such as investments in equity and debt securities.
ii) The fair value of financial instruments that are not traded
in an active market is determined by using valuation
techniques using observable market data. Such valuation
techniques include discounted cash flows, standard
valuation models based on market parameters for
interest rates, yield curves or foreign exchange rates,
dealer quotes for similar instruments and use of
comparable arms length transactions. For example, the
fair value of forward exchange contracts, currency swaps
and interest rate swaps is determined by discounting
estimated future cash flows using a risk-free interest rate.
iii) The fair value of financial instruments that are measured on
the basis of entity specific valuations using inputs that are
not based on observable market data (unobservable inputs).
When the fair value of unquoted instruments cannot be
measured with sufficient reliability, the Group carries
such instruments at cost less impairment, if applicable.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand
and other short-term highly liquid investments with maturities
of three months or less from the initial recognition.
Short-term investments
Short-term investments are those which have maturities of
more than three months at initial recognition and which are
expected to be realised within 12 months after the reporting
date.
Inventories
Raw materials and purchased finished goods are valued at
purchase cost. Work in progress and manufactured finished
goods are valued at production cost. Production cost includes
direct production costs and an appropriate proportion of
production overheads and factory depreciation. The cost of

70

inventories includes the gains/losses on qualified cash flow


hedges for the purchase of raw materials and finished goods.
Raw material inventories and purchased finished goods
are accounted for using the FIFO (first in, first out) method.
The weighted average cost method is used for other
inventories.
An allowance is established when the net realisable value
of any inventory item is lower than the value calculated above.
Prepayments and accrued income
Prepayments and accrued income comprise payments made
in advance relating to the following year, and income relating
to the current year, which will not be invoiced until after the
balance sheet date.
Property, plant and equipment
Property, plant and equipment are shown on the balance
sheet at their historical cost. Subsequent costs are included
in the assets carrying amount only when it is probable that
future economic benefits associated with the item will be
realised. The carrying amount of a replaced part is
derecognised. All other repairs and maintenance are charged
to the income statement.
Depreciation is provided on components that have
homogenous useful lives by using the straight-line method
so as to depreciate the initial cost down to the residual
value over the estimated useful lives. The residual values
are30% on head offices and nil for all other asset types.
The useful lives are as follows:
Buildings
2040 years
Machinery and equipment
1025 years
Tools, furniture, information technology
and sundry equipment
310 years
Vehicles
38 years
Land is not depreciated.
Useful lives, components and residual amounts are reviewed
annually. Such a review takes into consideration the nature
of the assets, their intended use including but not limited to
the closure of facilities and the evolution of the technology
and competitive pressures that may lead to technical
obsolescence.
Depreciation of property, plant and equipment is allocated
to the appropriate headings of expenses by function in the
income statement.
Borrowing costs incurred during the course of construction
are capitalised if the assets under construction are significant
and if their construction requires a substantial period to
complete (typically more than one year). The capitalisation
rate is determined on the basis of the short-term borrowing
rate for the period of construction. Premiums capitalised for
leasehold land or buildings are amortised over the length of
Consolidated Financial Statements of the Nestl Group 2014

1. Accounting policies

the lease. Government grants are recognised in accordance


with the deferral method, whereby the grant is set up as
deferred income which is released to the income statement
over the useful life of the related assets. Grants that are not
related to assets are credited to the income statement when
they are received.
Leased assets
Leasing agreements which transfer to the Group substantially
all the rewards and risks of ownership of an asset are treated
as finance leases. All other leases are classified as operating
leases.
Assets acquired under finance leases are capitalised
and depreciated in accordance with the Groups policy on
property, plant and equipment unless the lease term is
shorter. Land and building leases are recognised separately
provided an allocation of the lease payments between these
categories is reliable. Finance leases are capitalised at the
lower of the fair value of the leased property and the present
value of the minimum lease payments. The associated
obligations are included under financial debt.
Rentals under operating leases are charged to the income
statement on a straight-line basis over the period of the lease.
The costs of the agreements that do not take the legal
form of a lease but convey the right to use an asset are
separated into lease payments and other payments if the
entity has the control of the use or of the access to the
asset or takes essentially all the output of the asset. Then
the entity determines whether the lease component of the
agreement is a finance or an operating lease.
Business combinations and related goodwill
Business combinations are accounted for using the acquisition
method. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date.
The consideration transferred is measured at fair value and
includes the fair value of any contingent consideration.
Subsequent changes in contingent consideration, when not
classified as equity, are recognised in the income statement.
The acquisition-related costs are charged to the income
statement in the period in which they are incurred. Where
not all of the equity of a subsidiary is acquired the noncontrolling interests are recognised at the non-controlling
interests share of the acquirees net identifiable assets.
Upon obtaining control in a business combination achieved
in stages, the Group remeasures its previously held equity
interest at fair value and recognises a gain or a loss to the
income statement.
Goodwill is recorded when the sum of the fair value of
consideration transferred plus the fair value of any existing
Consolidated Financial Statements of the Nestl Group 2014

Nestl ownership interest in the acquiree and the amount of


any non-controlling interest exceeds the fair value of the
acquirees net assets. If the fair value of the acquirees net
assets exceeds this amount a gain is recognised immediately
in the income statement.
Acquisitions and disposals of non-controlling interests
The Group treats transactions with non-controlling interests
that do not result in loss of control as transactions with equity
holders in their capacity as equity holders. For purchases of
shares from non-controlling interests, the difference between
any consideration paid and the relevant share acquired of the
carrying amount of net assets of the subsidiary is recorded in
equity. The same principle is applied to disposals of shares
to non-controlling interests.
Intangible assets
This heading includes intangible assets that are internally
generated or acquired, either separately or in a business
combination, when they are identifiable and can be reliably
measured. Intangible assets are considered to be identifiable
if they arise from contractual or other rights, or if they are
separable (i.e. they can be disposed of either individually
or together with other assets). Intangible assets comprise
indefinite life intangible assets and finite life intangible assets.
Internally generated intangible assets are capitalised, provided
they generate future economic benefits and their costs are
clearly identifiable.
Indefinite life intangible assets are those for which there
is no foreseeable limit to their useful economic life as they
arise from contractual or other legal rights that can be
renewed without significant cost and are the subject of
continuous marketing support. They mainly comprise certain
brands, trademarks and intellectual property rights. They are
not amortised but tested for impairment annually or more
frequently if an impairment indicator is triggered. The
assessment of the classification of intangible assets as
indefinite is reviewed annually.
Finite life intangible assets are those for which there is
an expectation of obsolescence that limits their useful
economic life or where the useful life is limited by contractual
or other terms. They are amortised over the shorter of their
contractual or useful economic lives. They comprise mainly
management information systems, patents and rights to
carry on an activity (e.g. exclusive rights to sell products or
to perform a supply activity). Finite life intangible assets are
amortised on a straight-line basis assuming a zero residual
value: management information systems over a period
ranging from 3 to 5years; other finite intangible assets over
the estimated useful life or the related contractual period,
generally 5 to 20 years or longer, depending on specific
71

1. Accounting policies

circumstances. Useful lives and residual values are reviewed


annually. Amortisation of intangible assets is allocated to the
appropriate headings of expenses by function in the income
statement.
Research and development
Internal research costs are charged to the income statement
in the year in which they are incurred. Development costs
are only recognised as assets on the balance sheet if all the
recognition criteria set by IAS 38 Intangible Assets are met
before the products are launched on the market. Development
costs are therefore charged to the income statement in the
year in which they are incurred due to uncertainties inherent
in the development of new products because the expected
future economic benefits cannot be reliably determined. As
long as the products have not reached the market place, there
is no reliable evidence that positive future cash flows would
be obtained.
Payments made to third parties in order to in-license or
acquire intellectual property rights, compounds and products
are capitalised as they are separately identifiable and are
expected to generate future benefits.
Other development costs (essentially management
information system software) are capitalised provided that
there is an identifiable asset that will be useful in generating
future benefits in terms of savings, economies of scale, etc.
Capitalised development costs are subsequently
accounted for as described in the section Intangible assets
above.
Impairment of goodwill and indefinite life
intangible assets
Goodwill and indefinite life intangible assets are tested for
impairment at least annually and upon the occurrence of
an indication of impairment.
The impairment tests are performed annually at the same
time each year and at the cash generating unit (CGU) level.
The Group defines its CGU for goodwill impairment testing
based on the way that it monitors and derives economic
benefits from the acquired goodwill. For indefinite life
intangible assets, the Group defines its CGU as the smallest
identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets
or groups of assets. The impairment tests are performed by
comparing the carrying value of the assets of these CGU
with their recoverable amount, based on their value in use,
which corresponds to their future projected cash flows
discounted at an appropriate pre-tax rate of return. Usually,
the cash flows correspond to estimates made by Group
Management in financial plans and business strategies
covering a period of five years after making adjustments to
72

consider the assets in their current condition. They are then


projected to perpetuity using a multiple which corresponds
to a steady or declining growth rate. The Group assesses
the uncertainty of these estimates by making sensitivity
analyses. The discount rate reflects the current assessment
of the time value of money and the risks specific to the CGU
(essentially country risk). The business risk is included in
the determination of the cash flows. Both the cash flows
and the discount rates include inflation.
An impairment loss in respect of goodwill is never
subsequently reversed.
Impairment of property, plant and equipment
and finite life intangible assets
Consideration is given at each balance sheet date to
determine whether there is any indication of impairment
of the carrying amounts of the Groups property, plant and
equipment and finite life intangible assets. Indication could
be unfavourable development of a business under competitive
pressures or severe economic slowdown in a given market
as well as reorganisation of the operations to leverage their
scale. If any indication exists, an assets recoverable amount
is estimated. An impairment loss is recognised whenever
the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the fair
value less cost of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted
to their present value, based on the time value of money
and the risks specific to the country where the assets are
located. The risks specific to the asset are included in the
determination of the cash flows.
Assets that have suffered an impairment are tested for
possible reversal of the impairment at each reporting date if
indications exist that impairment losses recognised in prior
periods no longer exist or have decreased.
Assets held for sale, disposal groups
and discontinued operations
Non-current assets held for sale (and disposal groups) are
presented separately in the current section of the balance
sheet. Immediately before the initial classification of the
assets (and disposal groups) as held for sale, the carrying
amounts of the assets (or all the assets and liabilities in the
disposal groups) are measured in accordance with their
applicable accounting policy. Non-current assets held for
sale (and disposal groups) are subsequently measured at
the lower of their carrying amount and fair value less cost
to sell. Non-current assets held for sale (and disposal
groups) are no longer amortised or depreciated.
An operation is classified as discontinued if it is
a component of an entity which is either a separate major
Consolidated Financial Statements of the Nestl Group 2014

1. Accounting policies

line of business or geographical area of operations, or a part


of a plan to exit such a business or area of operations, which
has been disposed of or is classified as held for sale. Upon
occurrence of discontinued operations, the income statement
of the discontinued operations is presented separately in the
consolidated income statement. Comparative information is
restated accordingly. Balance sheet and cash flow information
related to discontinued operations are disclosed separately
in the notes.
Provisions
Provisions comprise liabilities of uncertain timing or amount
that arise from restructuring plans, environmental, litigation
and other risks. Provisions are recognised when there exists
a legal or constructive obligation stemming from a past event
and when the future cash outflows can be reliably estimated.
Obligations arising from restructuring plans are recognised
when detailed formal plans have been established and when
there is a valid expectation that such plans will be carried out
by either starting to implement them or announcing their
main features. Obligations under litigation reflect Group
Managements best estimate of the outcome based on the
facts known at the balance sheet date.
Contingent assets and liabilities
Contingent assets and liabilities are possible rights and
obligations that arise from past events and whose existence
will be confirmed only by the occurrence or non-occurrence
of one or more uncertain future events not fully within the
control of the Group. They are disclosed in the notes.
Post-employment benefits
The liabilities of the Group arising from defined benefit
obligations, and the related current service cost, are
determined using the projected unit credit method. Actuarial
advice is provided both by external consultants and by
actuaries employed by the Group. The actuarial assumptions
used to calculate the defined benefit obligations vary
according to the economic conditions of the country in
which the plan is located. Such plans are either externally
funded (in the form of independently administered funds)
or unfunded.
The deficit or excess of the fair value of plan assets over
the present value of the defined benefit obligation is
recognised as a liability or an asset on the balance sheet.
An excess of assets is recognised only to the extent that it
represents a future economic benefit which is available in
the form of refunds from the plan or reductions in future
contributions to the plan. When these criteria are not met,
it is not recognised but is disclosed in the notes. Impacts of

Consolidated Financial Statements of the Nestl Group 2014

minimum funding requirements in relation to past service


are considered when determining pension obligations.
Pension cost charged to the income statement consists
of service cost (current and past service cost, gains and
losses arising from settlement) and administration costs
(other than costs of managing plan assets) and net interest
expense or income. Past service cost is recognised at the
earlier of the following dates:
when the plan amendment or curtailment occurs; and
when the related restructuring costs or termination
benefits are recognised.
Remeasurements of the defined benefit plans are reported
in other comprehensive income. They correspond to the
actual return on plan assets, excluding interest income,
changes in actuarial assumptions and differences between
actuarial assumptions and what has actually occurred.
Some benefits are also provided by defined contribution
plans. Contributions to such plans are charged to the
income statement as incurred.
Equity compensation plans
The Group has equity-settled and cash-settled share-based
payment transactions.
Equity-settled share-based payment transactions are
recognised in the income statement with a corresponding
increase in equity over the vesting period. They are fair
valued at grant date and measured using generally accepted
pricing models. The cost of equity-settled share-based
payment transactions is adjusted annually by the expectations
of vesting, for the forfeitures of the participants rights that
no longer satisfy the plan conditions, as well as for early
vesting.
Liabilities arising from cash-settled share-based payment
transactions are recognised in the income statement over
the vesting period. They are fair valued at each reporting
date and measured using generally accepted pricing models.
The cost of cash-settled share-based payment transactions
is adjusted for the forfeitures of the participants rights that
no longer satisfy the plan conditions, as well as for early
vesting.
Accruals and deferred income
Accruals and deferred income comprise expenses relating
to the current year, which will not be invoiced until after the
balance sheet date, and income received in advance relating
to the following year.

73

1. Accounting policies

Dividend
In accordance with Swiss law and the Companys Articles
of Association, dividend is treated as an appropriation of
profit in the year in which it is ratified at the Annual General
Meeting and subsequently paid.
Events occurring after the balance sheet date
The values of assets and liabilities at the balance sheet date
are adjusted if there is evidence that subsequent adjusting
events warrant a modification of these values. These
adjustments are made up to the date of approval of the
Consolidated Financial Statements by the Board of Directors.
Other non-adjusting events are disclosed in the notes.

IFRS 15 Revenue from Contract with Customers


This standard combines, enhances and replaces specific
guidance on recognising revenue with a single standard.
It defines a new five-step model to recognise revenue
from customer contracts. The Group is currently assessing
the potential impact of this new standard.
This standard is mandatory for the accounting period
beginning on 1 January 2017.
Improvements and other amendments to IFRS/IAS
A number of standards have been modified on miscellaneous
points. None of these amendments are expected to have
a material effect on the Groups Financial Statements.

Changes in accounting policies


A number of standards have been modified on miscellaneous
points with effect from 1 January 2014. Such changes include
Recoverable Amount Disclosures for Non-Financial Assets
(Amendments to IAS 36), which the Group early-adopted
in 2013, as well as IFRIC 21 Levies, and Offsetting Financial
Assets and Financial Liabilities (Amendments to IAS 32).
None of these amendments had a material effect on the
Groups Financial Statements.
Changes in IFRS that may affect the Group
after 31 December 2014
The following new standards, interpretations and
amendments to existing standards have been published
and are mandatory for the accounting period beginning
on 1 January 2015 or later. The Group has not early adopted
them.
IFRS 9 Financial Instruments
The standard addresses the principles for the financial
reporting of financial assets and financial liabilities, including
classification, measurement, impairment, derecognition and
hedge accounting. The standard will affect the Groups
accounting for its available-for-sale financial assets, as
IFRS9 only permits the recognition of fair value gains and
losses in other comprehensive income under some
circumstances and gains and losses on certain instruments
with specific cash flow characteristics are never reclassified
to the income statement at a later date.
There will be no impact on the Groups accounting for
financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated at fair
value to income statement, and the Group does not have any
such liabilities. The Group is currently assessing the impact
of the new hedge accounting and impairment requirements.
This standard is mandatory for the accounting period
beginning on 1 January 2018.
74

Consolidated Financial Statements of the Nestl Group 2014

2. Acquisitions and disposals of businesses


2.1 Modification of the scope of consolidation
Acquisitions
The main acquisitions are:
Remaining 50% of Galderma, worldwide, dermatology pharmaceuticals products
(Nutrition and Health Science), July.
Aesthetic products business commercialisation rights from Valeant Pharmaceuticals
International, USA and Canada, aesthetic dermatology products (Nutrition and Health
Science), 100%, July.
Disposals
There was no major disposal in 2014.
2.2 Acquisitions of businesses
The major classes of assets acquired and liabilities assumed at the acquisition date are:
In millions of CHF
2014

2013

Total

Total

Galderma

Aesthetic business
commercial rights
Valeant

Other
acquisitions

401

87

488

35

Intangible assets (a)

5 401

959

20

6 380

125

Inventories and other assets (b)

1 171

17

76

1 264

39

(179)

(50)

(229)

(1)

(1 015)

(19)

(1 034)

(41)

(525)

(17)

(81)

5 254

959

33

Property, plant and equipment

Financial debt
Employee benefits, deferred taxes and provisions
Other liabilities
Fair value of identifiable net assets

(623)
6 246

(26)
131

(a) Mainly trademarks, trade names, patents, technology, research & development intangible assets and reacquired rights.
(b) Galderma: including the fair value of trade receivables of CHF 434 million with a gross contractual amount
of CHF 448 million and estimated cash flows of CHF 14 million not expected to be collected.

Since the valuation of the assets and liabilities of recently acquired businesses is still
in process, the values are determined provisionally.

Consolidated Financial Statements of the Nestl Group 2014

75

2. Acquisitions and disposals of businesses

The goodwill arising on acquisitions and the cash outflow are:


In millions of CHF

Fair value of consideration transferred


Non-controlling interests (a)
Fair value of pre-existing interests (b)

2014

2013

Total

Total

Galderma

Aesthetic business
commercial rights
Valeant

Other
acquisitions

3 907

1 240

99

5 246

3 923

47

3 970

382

7 830

1 240

148

9 218

385

Fair value of identifiable net assets

(5 254)

(959)

(33)

(6 246)

(131)

Goodwill

2 576

281

115

2 972

254

2014

2013

Total

Total

Subtotal

(a) Non-controlling interests have been measured based on their proportionate interest in the recognised amounts of net assets
of the entities acquired.
(b) See Note 15 for the revaluation gain on the 50% stake already held in Galderma. For other acquisitions, the remeasurement
to fair value of pre-existing interests in one of the business acquisitions resulted in a gain of CHF43million and has been
recognised under Other operating income in the income statement (see Note 4.2).

In millions of CHF

Galderma

Aesthetic business
commercial rights
Valeant

Other
acquisitions

3 907

1 240

99

(83)

(16)

(99)

(3 201)

(3 201)

Consideration payable

(3)

Settled in treasury shares (b)

(280)

Fair value of consideration transferred


Cash and cash equivalents acquired
Settled in LOral shares (a)

5 246

382
(1)

Payment of consideration payable on prior years


acquisitions
Cash outflow on acquisitions

40

40

223

623

1 240

123

1 986

321

(a) T
 he Group sold part of its shares to LOral for a price of CHF 7342 million (see Note 15) in exchange for the remaining 50%
stake in Galderma for an equity value of CHF 3201 million and cash of CHF 4141 million.
(b) In 2013, four million Nestl S.A. shares were given as consideration. The number of shares was based on the purchase
price of the business. The fair value of the shares transferred was based on the market price at the date of acquisition of
CHF 69.50 per share.

For Galderma, the consideration transferred consists of payments made in LOral shares
and in cash to repay the loans granted by LOral to Galderma. For the other acquisitions,
the consideration transferred consists of payments made in cash with some consideration
remaining payable.
Galderma
On 8 July 2014, the Group brought its ownership in Galderma to 100% by acquiring a 50%
stake from LOral (see Note 15.3). Galderma is a Swiss company, specializing in innovative
medical solutions in dermatology pharmaceuticals products with an extensive product
portfolio available in 70 countries. With this acquisition, the Group will pursue its strategic
development in Nutrition, Health and Wellness, by expanding its activities to medical
skin treatments. The goodwill arising on this acquisition includes elements such as early
stage pioneering research and development projects with strong growth potential. The
goodwill is not expected to be deductible for tax purposes.
76

Consolidated Financial Statements of the Nestl Group 2014

2. Acquisitions and disposals of businesses

Aesthetic dermatology products business commercialisation rights from


Valeant Pharmaceuticals International
On 10 July 2014, the Group acquired a business which exploits full rights to commercialise
several key aesthetic dermatology products in USA and Canada from Valeant Pharmaceuticals
International. The two markets together represent more than half of the fast-growing medical
aesthetic market around the world. The acquisition of these key strategic assets will extend
and reinforce the Groups presence in the field of specialised medical skin treatments. The
goodwill arising from this acquisition represents the acquisition of the strong geographic
footprint in the North America business of the aesthetic dermatology products. The goodwill
is expected to be deductible for tax purposes.
The cumulative impact of the acquisition of the two closely related businesses, Galderma
and the Aesthetic business commercial rights from Valeant, both part of the operating
segment Nestl Skin Health (reported in Other businesses see Note 3.1) is as follows.
Firstly, sales and profit for the year 2014 included in the Consolidated Financial Statements
amount respectively to CHF 1399 million and CHF 305 million. Secondly, the Groups
total sales and profit for the year 2014 would have amounted respectively to approximately
CHF 92.4 billion and CHF 14.9 billion if both acquisitions had been effective 1 January 2014.
These latter amounts have been determined based on the assumption that the fair value
adjustments at the acquisition dates would have been the same at 1 January 2014.
Acquisition-related costs
Acquisition-related costs, which mostly relate to the acquisition of Galderma and the
Aesthetic business commercialisation rights from Valeant, have been recognised under
Other operating expenses in the income statement (see Note 4.2) for an amount of
CHF29million (2013: CHF20 million mostly related to Wyeth Nutrition).
2.3 Assets held for sale
As of 31 December 2014, assets held for sale are mainly composed of businesses which
management is committed to sell and for which the completion of the sale is highly
probable. Accordingly, assets and liabilities of these businesses have been reclassified
as disposal groups held for sale. Those disposal groups relate mainly to frozen food and
water businesses in Europe, respectively part of Other businesses and Nestl Waters
operating segments. Those planned disposals were undertaken as part of the ongoing
product portfolio management review. They are carried at their net book value before
reclassification or at their estimated net selling price based on discussions with potential
purchasers (categorised as Level 3 in accordance to IFRS 13). No individually significant
impairment of disposal groups has been accounted for.
As of 31 December 2013, assets held for sale were mainly composed of the Performance
Nutrition business, which was part of the Nestl Nutrition operating segment. This business
has been disposed of during 2014.
2.4 Disposals of businesses
Cash inflow on disposals of businesses relates to several non-significant disposals.
The loss on disposal (see Note 4.2) is mainly composed of a cumulative loss in other
comprehensive income of CHF 322 million (mainly related to the Performance Nutrition
business, see Note 2.3) that has been recycled in the income statement, of impairment
of disposal groups held for sale and of various expenses incurred or accrued to finalize
the disposals.

Consolidated Financial Statements of the Nestl Group 2014

77

3. Analyses by segment
3.1 Operating segments
Revenue and results
In millions of CHF

Trading
operating profit

Net other trading


income/(expenses) (b)

of which
impairment (c)

of which
restructuring costs

Zone Europe

15 175

2 327

(105)

(27)

(81)

Zone Americas

27 277

5 117

(316)

(59)

(59)

(1 835)

Zone Asia, Oceania and Africa

(52)

Impairment
of goodwill

Sales (a)

2014

18 272

3 408

(110)

(11)

(31)

Nestl Waters

7 390

714

(34)

(7)

(28)

(1)

Nestl Nutrition

9 614

1 997

(105)

(45)

(13)

(4)

2 654

(35)

(6)

(4)

(16)

(2 198)

(92)

(4)

(41)

(797)

(159)

(257)

Other businesses (d)


Unallocated items (e)
Total

13 884

91 612

14 019

(1 908)

In millions of CHF

of which
restructuring costs

15 567

2 331

(115)

(33)

(54)

(2)

Zone Americas

28 358

5 162

(415)

(31)

(91)

Zone Asia, Oceania and Africa

Impairment
of goodwill

Trading
operating profit

Zone Europe

of which
impairment (c)

Sales (a)

Net other trading


income/(expenses) (b)

2013 (f)

18 851

3 562

(37)

(7)

(13)

Nestl Waters

7 257

665

(24)

(11)

(5)

Nestl Nutrition

9 826

1 961

(78)

(11)

(34)

(84)

2 175

(67)

(43)

(18)

(23)

(1 809)

(109)

(7)

(67)

(845)

(143)

(274)

Other businesses (d)


Unallocated items (e)
Total

12 299

92 158

14 047

(114)

(a) Inter-segment sales are not significant.


(b) Included in Trading operating profit.
(c) Impairment of property, plant and equipment and intangible assets.
(d) Mainly Nespresso, Nestl Professional, Nestl Health Science and Nestl Skin Health (renamed following the integration
of Galderma as from July 2014).
(e) Refer to the Segment reporting section of Note 1 Accounting policies for the definition of unallocated items.
(f) 2013 comparatives have been restated following the transfer of responsibility for Nestea RTD businesses in geographic
Zones to Nestl Waters effective as from 1 January 2014.

Refer to Note 3.3 for the reconciliation from trading operating profit to profit before
taxes, associates and joint ventures.

78

Consolidated Financial Statements of the Nestl Group 2014

3. Analyses by segment

Assets and other information


In millions of CHF

of which
goodwill and
intangible assets

of which
capital expenditure

Depreciation and
amortisation of
segment assets

Zone Europe

11 308

2 050

749

747

(473)

Zone Americas

20 915

7 952

1 226

1 039

(681)

Zone Asia, Oceania and Africa

15 095

4 580

803

697

(510)

6 202

1 569

327

308

(403)

Nestl Nutrition

24 448

15 352

501

363

(330)

Other businesses (a)

21 345

13 295

10 399

573

(525)

Unallocated items (b)

11 892

9 559

258

187

(136)

Inter-segment eliminations

(1 928)

54 357

14 263

3 914

Nestl Waters

Total segments
Non-segment assets
Total

109 277

Capital additions

Segment assets

2014

(3 058)

24 173
133 450

In millions of CHF

Depreciation and
amortisation of
segment assets

of which
capital expenditure

Capital additions

of which
goodwill and
intangible assets

Segment assets

2013 (c)

Zone Europe

11 779

2 229

980

964

(517)

Zone Americas

21 243

9 058

1 134

1 019

(769)

Zone Asia, Oceania and Africa

14 165

4 284

1 279

1 280

(520)

6 046

1 575

405

377

(442)

22 517

14 089

562

430

(337)

Other businesses (a)

9 564

3 709

1 091

642

(437)

Unallocated items (b)

11 060

8 768

293

216

(143)

Inter-segment eliminations

(2 021)

43 712

5 744

4 928

Nestl Waters
Nestl Nutrition

Total segments
Non-segment assets
Total

94 353

(3 165)

26 089
120 442

(a) Mainly Nespresso, Nestl Professional, Nestl Health Science and Nestl Skin Health (renamed following the integration
of Galderma as from July 2014).
(b) Refer to the Segment reporting section of Note 1 Accounting policies for the definition of unallocated items.
(c) 2013 comparatives have been restated following the transfer of responsibility for Nestea RTD businesses in geographic
Zones to Nestl Waters effective as from 1 January 2014.

Consolidated Financial Statements of the Nestl Group 2014

79

3. Analyses by segment

3.2 Products
Revenue and results
In millions of CHF

Sales

Trading
operating profit

Net other trading


income/(expenses) (a)

of which
impairment (b)

of which
restructuring costs

Impairment
of goodwill

2014

20 302

4 685

(51)

(23)

(28)

(16)

6 875

710

(34)

(7)

(27)

(1)

Milk products and Ice cream

16 743

2 701

(162)

(19)

(62)

(1 028)

Nutrition and Health Science (c)

13 046

2 723

(121)

(45)

(16)

(4)

Prepared dishes and cooking aids

13 538

1 808

(148)

(39)

(29)

(807)

9 769

1 344

(129)

(4)

(42)

(52)

11 339

2 246

(60)

(18)

(12)

(2 198)

(92)

(4)

(41)

(797)

(159)

(257)

Powdered and Liquid Beverages


Water

Confectionery
PetCare
Unallocated items (d)
Total

91 612

14 019

(1 908)

In millions of CHF

Trading
operating profit

of which
restructuring costs

Impairment
of goodwill

20 495

4 649

(95)

(21)

(27)

6 773

678

(21)

(9)

(5)

Milk products and Ice cream

17 357

2 632

(177)

(14)

(44)

Nutrition and Health Science (c)

11 840

2 228

(120)

(44)

(38)

Prepared dishes and cooking aids

14 171

1 876

(120)

(28)

(61)

Confectionery

10 283

1 630

(86)

(19)

(23)

PetCare

11 239

2 163

(117)

(1)

(17)

(1 809)

(109)

(7)

(67)

(2)

(845)

(143)

(274)

(114)

Powdered and Liquid Beverages


Water

Unallocated items (d)


Total

92 158

14 047

of which
impairment (b)

Sales

Net other trading


income/(expenses) (a)

2013

(107)

(a) Included in Trading operating profit.


(b) Impairment of property, plant and equipment and intangible assets.
(c) Renamed following the integration of Galderma as from July 2014.
(d) Refer to the Segment reporting section of Note 1 Accounting policies for the definition of unallocated items.

Refer to Note 3.3 for the reconciliation from trading operating profit to profit before
taxes, associates and joint ventures.

80

Consolidated Financial Statements of the Nestl Group 2014

3. Analyses by segment

Assets and liabilities


In millions of CHF

Liabilities

11 599

648

4 790

5 928

1 532

1 764

Milk products and Ice cream

14 387

4 874

3 818

Nutrition and Health Science (a)

32 245

21 578

4 325

Prepared dishes and cooking aids

13 220

6 099

2 934

7 860

1 964

2 561

14 344

9 182

2 004

1 179

2 176

(2 668)

100 762

48 053

Assets

of which
goodwill and
intangible assets

2014

Powdered and Liquid Beverages


Water

Confectionery
PetCare
Unallocated items (b) and intra-group eliminations
Total

19 528

In millions of CHF

Liabilities

11 044

477

4 607

6 209

1 621

1 747

Milk products and Ice cream

14 805

5 220

3 773

Nutrition and Health Science (a)

28 699

18 648

3 838

Prepared dishes and cooking aids

13 289

6 373

2 761

8 190

2 071

2 611

14 064

9 185

1 819

1 081

2 146

(2 821)

97 381

45 741

Assets

of which
goodwill and
intangible assets

2013

Powdered and Liquid Beverages


Water

Confectionery
PetCare
Unallocated items (b) and intra-group eliminations
Total

18 335

(a) Renamed following the integration of Galderma as from July 2014.


(b) Refer to the Segment reporting section of Note 1 Accounting policies for the definition of unallocated items.

Consolidated Financial Statements of the Nestl Group 2014

81

3. Analyses by segment

3.3 Reconciliation from trading operating profit to profit before taxes,


associates and joint ventures
In millions of CHF
2014

2013

Trading operating profit

14 019

14 047

Impairment of goodwill

(1 908)

Net other operating income/(expenses) excluding impairment of goodwill

(1 206)

Operating profit

10 905

Net financial income/(expense)

(637)

Profit before taxes, associates and joint ventures

10 268

(114)
(865)
13 068
(631)
12 437

3.4 Customers
There is no single customer amounting to 10% or more of Groups revenues.

3.5 Geography (top ten countries and Switzerland)


In millions of CHF
2014

2013
Sales

Non-current
assets (a)

23 489

15 028

23 334

15 161

Greater China Region

6 638

6 020

6 618

5 414

France

5 507

1 708

5 578

1 683

Brazil

5 117

1 186

5 116

1 057

Germany

3 340

1 556

3 321

1 598

United Kingdom

2 987

1 232

2 824

1 111

Mexico

2 960

796

3 179

697

Philippines

2 489

958

2 410

877

Italy

2 108

823

2 098

849

Canada

1 962

578

2 064

552

Switzerland (b)

1 566

4 616

1 512

2 846

Sales
USA

Rest of the world and unallocated items


Total

Non-current
assets (a)

33 449

48 277

34 104

38 762

91 612

82 778

92 158

70 607

(a) Relate to property, plant and equipment, intangible assets and goodwill.
(b) Country of domicile of Nestl S.A.

The analysis of sales by geographic area is stated by customer location.

82

Consolidated Financial Statements of the Nestl Group 2014

4. Net other trading and operating income/(expenses)


4.1 Net other trading income/(expenses)
In millions of CHF
2014

2013

Profit on disposal of property, plant and equipment

50

24

Miscellaneous trading income

60

96

110

120

Notes

Other trading income


Loss on disposal of property, plant and equipment
Restructuring costs
Impairment of property, plant and equipment and intangible assets

8/9

Litigations and onerous contracts (a)


Miscellaneous trading expenses

(14)

(9)

(257)

(274)

(159)

(143)

(411)

(380)

(66)

(159)

Other trading expenses

(907)

(965)

Total net other trading income/(expenses)

(797)

(845)

2014

2013

(a) Mainly relates to numerous separate legal cases (for example labour, civil and tax litigations), liabilities linked to product
withdrawals as well as several separate onerous contracts.

4.2 Net other operating income/(expenses)


In millions of CHF
Notes

Profit on disposal of businesses

83

33

Miscellaneous operating income (a)

71

583

154

616

Other operating income


Loss on disposal of businesses

(592)

(1 221)

Impairment of goodwill

(1 908)

(114)

Miscellaneous operating expenses (b)

(768)

(260)

Other operating expenses

(3 268)

(1 595)

Total net other operating income/(expenses)

(3 114)

(979)

(a) In 2013, mainly relates to the disposal of Givaudan shares, which were categorised as available-for-sale.
(b) Mainly includes the effect of hyperinflation in Venezuela (see Note 23).

Consolidated Financial Statements of the Nestl Group 2014

83

5. Net financial income/(expense)


In millions of CHF
Notes

2014

2013

Interest income

89

199

Interest expense

(521)

(580)

Net financing cost

(432)

(381)

Interest income on defined benefit plans

10

Interest expense on defined benefit plans

10

Net interest income/(expense) on defined benefit plans


Other
Net financial income/(expense)

46

20

(240)

(268)

(194)

(248)

(11)

(2)

(637)

(631)

6. Inventories
In millions of CHF
2014

2013

Raw materials, work in progress and sundry supplies

3 797

3 499

Finished goods

5 643

5 138

Allowance for write-down to net realisable value

(268)
9 172

(255)
8 382

Inventories amounting to CHF 240 million (2013: CHF 252 million) are pledged as security
for financial liabilities.

7. Trade and other receivables


7.1 By type
In millions of CHF
Trade receivables
Other receivables

2014

2013

10 283

9 367

3 176

2 839

13 459

12 206

The five major customers represent 11% (2013: 11%) of trade and other receivables, none
of them individually exceeding 6% (2013:6%).

84

Consolidated Financial Statements of the Nestl Group 2014

7. Trade and other receivables

7.2 Past due and impaired receivables


In millions of CHF
2014

2013

11 801

10 175

Past due 130 days

851

1 054

Past due 3160 days

254

284

Past due 6190 days

108

116

Past due 91120 days

60

103

Not past due

Past due more than 120 days

737

851

Allowance for doubtful receivables

(352)

(377)

13 459

12 206

2014

2013

377

374

7.3 Allowance for doubtful receivables


In millions of CHF
At 1 January
Currency retranslations

(5)

Allowance made during the year

80

95

Amounts used and reversal of unused amounts

(99)

(74)

Modification of the scope of consolidation


At 31 December

(1)
352

(13)

(5)
377

Based on the historic trend and expected performance of the customers, the Group
believes that the above allowance for doubtful receivables sufficiently covers the risk
of default.

Consolidated Financial Statements of the Nestl Group 2014

85

8. Property, plant and equipment


In millions of CHF

Land and
buildings

Machinery
and
equipment

Tools,
furniture
and other
equipment

Vehicles

15 460

27 966

7 932

957

(655)

(1 398)

(222)

(27)

1 330

2 453

1 066

79

Disposals

(82)

(339)

(774)

(104)

(1 299)

Reclassified as held for sale

(40)

(139)

(26)

(3)

(208)

Modification of the scope of consolidation

(25)

(110)

(159)

(22)

15 988

28 433

7 817

880

53 118
1 154

Total

Gross value
At 1 January 2013
Currency retranslations
Capital expenditure (a)

At 31 December 2013
Currency retranslations

52 315
(2 302)
4 928

(316)

359

590

174

31

1 151

1 985

720

58

3 914

Disposals

(219)

(723)

(495)

(63)

(1 500)

Reclassified as held for sale

(266)

(286)

(161)

(78)

(791)

220

(13)

211

17 233

30 003

8 042

828

56 106

(5 136)

(14 735)

(5 360)

(508)

(25 739)

187

602

190

17

Depreciation

(428)

(1 360)

(970)

(106)

Impairments

Capital expenditure (a)

Modification of the scope of consolidation


At 31 December 2014
Accumulated depreciation and impairments
At 1 January 2013
Currency retranslations

996
(2 864)
(109)

(15)

(74)

(20)

Disposals

57

269

739

83

1 148

Reclassified as held for sale

19

96

17

133

Modification of the scope of consolidation

16

104

81

11

(5 300)

(15 098)

(5 323)

(502)

At 31 December 2013

212
(26 223)

(94)

(410)

(64)

(11)

(579)

(434)

(1 424)

(826)

(98)

(2 782)

Impairments

(15)

(113)

(8)

Disposals

163

642

473

60

1 338

Reclassified as held for sale

117

212

112

53

494

57

113

31

At 31 December 2014

(5 506)

(16 078)

(5 605)

(496)

(27 685)

Net at 31 December 2013

10 688

13 335

2 494

378

26 895

Net at 31 December 2014

11 727

13 925

2 437

332

28 421

Currency retranslations
Depreciation

Modification of the scope of consolidation

(136)

203

(a) Including borrowing costs.

At 31 December 2014, property, plant and equipment include CHF 1189 million of assets
under construction (2013: CHF1510million). Net property, plant and equipment held
under finance leases amount to CHF 171 million (2013: CHF201million). Net property,
plant and equipment of CHF 251 million are pledged as security for financial liabilities
(2013: CHF236million). Fire risks, reasonably estimated, are insured in accordance with
domestic requirements.

86

Consolidated Financial Statements of the Nestl Group 2014

8. Property, plant and equipment

Impairment
Impairment of property, plant and equipment arises mainly from the plans to optimise
industrial manufacturing capacities by closing or selling inefficient production facilities.
Commitments for expenditure
At 31 December 2014, the Group was committed to expenditure amounting
to CHF 520 million (2013: CHF724million).

Consolidated Financial Statements of the Nestl Group 2014

87

9. Goodwill and intangible assets

Goodwill

Brands and
intellectual
property rights

Operating
rights
and others

Management
information
systems

Total
intangible
assets

of which
internally
generated

In millions of CHF

34 387

11 709

1 090

3 833

16 632

3 538

11 583

23

11 606

(119)

(26)

(124)

(269)

(118)

402

183

Gross value
At 1 January 2013
of which indefinite useful life
Currency retranslations

(1 182)

Expenditure

71

116

215

Disposals

(1)

(52)

(11)

(64)

(23)

(14)

(37)

(13)

Reclassified as held for sale


Acquisition of businesses
Disposal of businesses
At 31 December 2013

(271)
254

91

34

125

(300)

(79)

(60)

(439)

32 630

11 428

1 083

3 839

16 350

(558)

3 590

11 305

35

11 340

2 693

552

100

74

726

61

Expenditure

14

226

269

509

253

Disposals

(36)

(8)

(44)

(30)

(44)

(57)

(131)

5 287

1 052

41

(6)

(3)

(2)

37 539

17 245

2 378

4 156

23 779

3 853

16 103

37

16 140

of which indefinite useful life


Currency retranslations

Reclassified as held for sale


Acquisition of businesses
Disposal of businesses
At 31 December 2014
of which indefinite useful life (a)

(357)
2 972
(399)

6 380
(11)

(51)

Accumulated amortisation and impairments


At 1 January 2013

(1 699)

(3 614)

(45)

(296)

(3 273)

Currency retranslations

25

116

120

111

Amortisation

(10)

(76)

(215)

(301)

(197)

Impairments
Disposals
Reclassified as held for sale
Disposal of businesses
At 31 December 2013
Currency retranslations
Amortisation
Impairments
Disposals
Reclassified as held for sale
Disposal of businesses

(114)

(3 038)

(31)

(3)

(34)

48

57

177

12

12

12

20

83

49

27

(1 591)

(77)

(272)

(3 328)

(123)

(22)

(10)

(54)

(86)

(39)

(49)

(88)

(139)

(276)

(124)

(1 908)

(3 677)

(3 112)

(18)

(2)

(3)

(23)

36

44

304

30

34

26

336

(166)

(329)

(3 484)

(3 979)

(19)

(19)

Net at 31 December 2013

31 039

11 351

811

511

12 673

478

Net at 31 December 2014

34 557

17 079

2 049

672

19 800

604

At 31 December 2014
of which indefinite useful life

(2 982)

(3 249)

(a) Annual impairment tests are performed in connection with goodwill impairment tests. Depending on the items tested,
the level at which the test is applied is the goodwill CGU or lower.

Internally generated intangible assets consist mainly of management information systems.


88

Consolidated Financial Statements of the Nestl Group 2014

9. Goodwill and intangible assets

9.1 Impairment charge during the year


The 2014 impairment charge mainly relates to the Direct Store Delivery system (DSD) cash
generating unit (CGU) for Frozen Pizza and Ice Cream in the USA.
The DSD CGU distributes ice cream (mainly the Dreyers business acquired in 2003) and
pizza (the Kraft Foods frozen pizza business acquired in 2010). Goodwill and intangible
assets, with an indefinite useful life, from these two acquisitions was allocated to
the DSD CGU.
An annual impairment test was conducted in the second half of the year. The challenging
environment, as well as market trends, impacted by consumer preferences and category
dynamics, led to lower than anticipated sales demand and margins. These cumulative
factors resulted in a downward revision of projected cash flows and a recoverable amount
of the CGU lower than its carrying amount. Consequently, a goodwill impairment charge
amounting to CHF 1835 million has been recognised (2013: nil). There was no impairment
of the carrying amounts of other assets of the CGU. The goodwill is included in the Zone
Americas reportable segment disclosed in Note 3.1. The recoverable amount of the CGU
has been determined based on a value-in-use calculation (see Note 9.2). A discount rate
of 7.7% (2013: 8.0%) was used in this calculation. The impairment loss has been included
in the heading Other operating expenses of the income statement.
After impairment of CHF 1835 million, the carrying amount of the DSD CGU includes,
apart from goodwill and intangible assets with indefinite useful life, other net operating
assets amounting to CHF 1173 million.

Consolidated Financial Statements of the Nestl Group 2014

89

9. Goodwill and intangible assets

9.2 Annual impairment tests


Impairment reviews have been conducted for more than 200 items of goodwill and
intangible assets with indefinite useful lives, allocated to more than 50 Cash Generating
Units (CGU).
The following five CGUs have been considered as significant either with regard to the
total goodwill or to the total intangible assets with indefinite useful life for which detailed
results are presented hereafter: Wyeth Nutrition (WN), PetCare Zone Americas, Nestl Skin
Health, Direct Store Delivery system (DSD) for Frozen Pizza and Ice Cream USA and
Infant Nutrition excluding WN.
In millions of CHF

Intangible
assets with
indefinite
useful life

Total

Goodwill

Intangible
assets with
indefinite
useful life

Total

2013

Goodwill

2014

Wyeth Nutrition (WN)

4 951

4 509

9 460

4 250

4 509

8 759

PetCare Zone Americas

7 584

172

7 756

6 833

155

6 988

Nestl Skin Health

3 037

4 098

7 135

DSD for Frozen Pizza and Ice Cream USA (a)

2 518

1 772

4 290

4 045

1 593

5 638

Infant Nutrition excluding WN


Subtotal
as % of total carrying amount
Other CGUs
Total

3 660

1 316

4 976

3 384

1 184

4 568

21 750

11 867

33 617

18 512

7 441

25 953

63%

74%

66%

60%

66%

61%

12 807

4 254

17 061

12 527

3 899

16 426

34 557

16 121

50 678

31 039

11 340

42 379

(a) After impairment (see Note 9.1).

For each CGU, except for DSD for Frozen Pizza and Ice Cream USA (see Note 9.1), the
recoverable amount is higher than its carrying amount. The recoverable amount has been
determined based upon a value-in-use calculation. Cash flows have been projected over
the next 5 years, except for Nestl Skin Health for which a 10 year period has been used
due to the product development cycle. They have been extrapolated using a steady or
declining terminal growth rate and discounted at a pre-tax weighted average rate.

90

Consolidated Financial Statements of the Nestl Group 2014

9. Goodwill and intangible assets

The following table summarises the key assumptions for each significant CGU:

Period of
cash flow
projections

Annual
sales
growth

Annual
margin
evolution

Terminal
growth
rate

Pre-tax
discount
rate

Wyeth Nutrition (WN)

5 years

5% to 15%

Improvement

3.9%

7.4%

PetCare Zone Americas

5 years

4% to 6%

Stable

2.0%

7.6%

10 years

10% to 24%

Improvement

2.4%

6.9%

DSD for Frozen Pizza and Ice Cream USA

5 years

2% to 1%

Improvement

1.5%

7.7%

Infant Nutrition excluding WN

5 years

1% to 7%

Improvement

3.3%

11.3%

Nestl Skin Health

The pre-tax discount rates have been computed based on external sources of information.
The cash flows for the first five years were based upon financial plans approved by
Group Management which are consistent with the Groups approved strategy for this
period. They are based on past performance and current initiatives.
The terminal growth rates have been determined to reflect the long term view of the
nominal evolution of the business.
Management believe that no reasonably possible change in any of the above key
assumptions would cause the CGUs recoverable amount to fall below the carrying value
of the CGUs except for the CGU DSD for Frozen Pizza and Ice Cream USA, for which
any negative change would lead to further impairment.
9.3 Commitments for expenditure of intangible assets
At 31 December 2014, the Group was committed to expenditure amounting
to CHF 44 million (2013: CHF9million).

Consolidated Financial Statements of the Nestl Group 2014

91

10. Employee benefits


Salaries and welfare expenses
The Groups total salaries and welfare expenses amount to CHF15978million
(2013: CHF15526million). They are allocated to the appropriate headings of expenses
by function.
Pensions and retirement benefits
Apart from legally required social security arrangements, the majority of Group employees are
eligible for benefits in case of retirement, death in service, disability and in case of resignation.
Those benefits are granted under defined contribution plans, as well as defined benefit plans
based on pensionable remuneration and length of service. All pension plans comply with
local tax and legal restrictions in their respective country, including funding obligations.
The Group manages its pension plans by geographic area and the major plans, classified
as defined benefit plans under IAS 19, are located in Europe (Switzerland, UK and Germany)
and in the Americas (USA). In accordance with applicable legal frameworks, these plans
have Boards of Trustees or General Assemblies which are generally independent from
the Group and are responsible for the management and governance of the plans.
In Switzerland, Nestls pension plan is a cash balance plan where contributions are
expressed as a percentage of the pensionable salary. The pension plan guarantees the
amount accrued on the members savings accounts, as well as a minimum interest on those
savings accounts. At retirement date, the savings accounts are converted into pensions.
However, members may opt to receive a part of the pension as a lump sum. Increases
of pensions in payment are granted on a discretionary basis by the Board of Trustees,
subject to the financial situation of the plan. To be noted that there is also a defined benefit
plan that has been closed to new entrants in 2013 and whose members below age 55 have
been transferred to the cash balance plan. This heritage plan is a hybrid between a cash
balance plan and a plan based on a final pensionable salary.
In the United Kingdom, Nestls pension plan is a career average plan with salary
revaluation. Members accrue a pension defined on the average of their salaries during
their career at Nestl since 2010. The salaries are automatically revalued according to
inflation subject to caps. Pensions earned before 2010 are also revalued according to
inflation subject to a cap and similarly, pensions in payment are mandatorily adjusted,
as well. At retirement, there is a lump sum option. Members have the option to switch
between the defined benefit sections and a defined contribution section.
Nestls pension plan in Germany is a cash balance plan, where members benefit
from a guarantee on their savings accounts. Contributions to the plan are expressed
as a percentage of the pensionable salary. Increases to pensions in payment are granted
in accordance with legal requirements. There is also a heritage plan, based on final
pensionable salary, that has been closed to new entrants in 2006.
In the USA, Nestls primary pension plan is non-contributory for the employees. The
plan is a pension equity design, under which members earn pension credits each year based
on a schedule related to the sum of their age and service with Nestl. A members benefit
is the sum of the annual pension credits earned multiplied by an average earning payable as
a lump sum. However, in lieu of the lump sum, members have the option of converting
the benefit to a monthly pension annuity. The plan does not provide for automatic pension
increases.
Post-employment medical benefits and other employee benefits
Group companies, principally in the Americas, maintain medical benefit plans, classified as
defined benefit plans under IAS 19, which cover eligible retired employees. The obligations
for other employee benefits consist mainly of end of service indemnities, which do not
have the character of pensions.
92

Consolidated Financial Statements of the Nestl Group 2014

10. Employee benefits

Risks related to defined benefit plans


The main risks to which the Group is exposed in relation to operating defined benefit
plans are:
mortality risk: the assumptions adopted by the Group make allowance for future
improvements in life expectancy. However, if life expectancy improves at a faster rate
than assumed, this would result in greater payments from the plans and consequently
increases in the plans liabilities. In order to minimise this risk, mortality assumptions
are reviewed on a regular basis.
market and liquidity risks: these are the risks that the investments do not meet the
expected returns over the medium to long term. This also encompasses the mismatch
between assets and liabilities. In order to minimise the risks, the structure of the portfolios
is reviewed and asset-liability matching analyses are performed on a regular basis.
Plan amendments and restructuring events
Plans within the Group are regularly reviewed as to whether they are aligned with market
practice in the local context. Should a review indicate that a plan needs to be changed,
prior agreement with the local Board of Trustees or the General Assembly, the regulator
and, if applicable, the members, is sought before implementing plan changes.
During the year, the main plan amendment concerned the US medical plan, where
a revision of the cost sharing arrangement took place. Other minor plan amendments have
taken place in Zone AOA. Amendments have been recognised as past service costs,
essentially impacting Zone AMS and Nestl Nutrition.
Asset-liability management and funding arrangement
Plan trustees or General Assemblies are responsible for determining the mix of asset
classes and target allocations of the Nestls plans with the support of investment advisors.
Periodical reviews of the asset mix are made by mandating external consultants to perform
asset liability matching analyses. Such analyses aim at comparing dynamically the fair value
of assets and the liabilities in order to determine the most adequate strategic asset allocation.
The overall investment policy and strategy for the Groups funded defined benefit plans
is guided by the objective of achieving an investment return which, together with the
contributions paid, is sufficient to maintain reasonable control over the various funding
risks of the plans. As those risks evolve with the development of capital markets and
asset management activities, the Group addresses the assessment and control process
of the major investment pension risks. In order to protect the Groups defined benefit plans
funding ratio and to mitigate the financial risks, protective measures on the investment
strategies are in force. To the extent possible, the risks are shared equally amongst the
different stakeholders.

Consolidated Financial Statements of the Nestl Group 2014

93

10. Employee benefits

10.1 Reconciliation of assets and liabilities recognised in the balance sheet


In millions of CHF

Present value of funded obligations


Fair value of plan assets
Excess of liabilities/(assets) over funded obligations
Present value of unfunded obligations
Unrecognised assets and minimum funding requirements
Net defined benefit liabilities/(assets)

Total

Post-employment
medical benefits
and other benefits

2013
Defined benefit
retirement plans

Total

Post-employment
medical benefits
and other benefits

Defined benefit
retirement plans

2014

27 971

56

28 027

23 770

78

23 848

(24 122)

(27)

(24 149)

(21 551)

(50)

(21 601)

3 849

29

3 878

2 219

28

2 247

767

1 933

2 700

693

1 690

2 383

34

34

106

106

4 650

1 962

6 612

3 018

1 718

4 736

992

Liabilities from non-current deferred compensation and other


Liabilities from cash-settled share-based transactions (a)
Net liabilities

927

94

79

7 698

5 742

Reflected in the balance sheet as follows:


(383)

Employee benefit assets

(537)

Employee benefit liabilities

8 081

6 279

Net liabilities

7 698

5 742

(a) The intrinsic value of liabilities from cash-settled share-based transactions that are vested amounts
toCHF57million (2013:CHF29million).

10.2 Funding situation by geographic area of defined benefit plans


In millions of CHF

Fair value of plan assets

Asia, Oceania
and Africa

Americas

Europe

Total

Asia, Oceania
and Africa

Americas

Europe
Present value of funded obligations

Total

2013

2014

20 731

5 295

2 001

28 027

17 757

4 250

1 841

23 848

(16 860)

(5 396)

(1 893)

(24 149)

(15 334)

(4 530)

(1 737)

(21 601)

3 871

(101)

108

3 878

2 423

(280)

104

2 247

402

2 017

281

2 700

342

1 757

284

2 383

Excess of liabilities/(assets) over funded


obligations
Present value of unfunded obligations

94

Consolidated Financial Statements of the Nestl Group 2014

10. Employee benefits

10.3 Movement in the present value of defined benefit obligations


In millions of CHF

Post-employment
medical benefits
and other benefits

Total

Defined benefit
retirement plans

Post-employment
medical benefits
and other benefits

Total

2013

Defined benefit
retirement plans

2014

24 463

1 768

26 231

25 618

2 108

27 726

23 770

78

23 848

24 911

77

24 988

693

1 690

2 383

707

2 031

2 738

Currency retranslations

642

88

730

(629)

(123)

(752)

Service cost

700

(25)

675

343

(80)

263

of which current service cost

739

56

795

831

65

of which past service cost

(39)

(81)

(120)

(488)

(145)

941

100

1 041

865

100

965

3 139

152

3 291

(580)

(166)

(746)

At 1 January
of which funded defined benefit plans
of which unfunded defined benefit plans

Interest expense
Actuarial (gains)/losses

896
(633)

(1 164)

(4)

(1 168)

(1 082)

(5)

(1 087)

Benefits paid on unfunded defined benefit plans

(87)

(118)

(205)

(72)

(139)

(211)

Modification of the scope of consolidation

154

28

182

Transfer from/(to) defined contribution plans

(50)

73

73

28 738

1 989

30 727

24 463

1 768

26 231

27 971

56

28 027

23 770

78

23 848

767

1 933

2 700

693

1 690

2 383

Benefits paid on funded defined benefit plans

At 31 December
of which funded defined benefit plans
of which unfunded defined benefit plans

(50)

10.4 Movement in fair value of defined benefit plan assets


In millions of CHF

Total

Defined benefit
retirement plans

Post-employment
medical benefits
and other benefits

(21 551)

(50)

(21 601)

(20 542)

(50)

Currency retranslations

(634)

(625)

540

(1)

539

Interest income

(851)

(1)

(852)

(717)

(2)

(719)

At 1 January

Total

Post-employment
medical benefits
and other benefits

2013

Defined benefit
retirement plans

2014

(20 592)

(1 467)

(1)

(1 468)

(952)

(950)

Employees contributions

(144)

(144)

(135)

(135)

Employer contributions

(639)

(2)

(641)

(879)

(4)

1 164

1 168

1 082

1 087
19

Actual return on plan assets, excluding interest income

Benefits paid on funded defined benefit plans


Administration expenses
Modification of the scope of consolidation
Transfer (from)/to defined contribution plans
At 31 December

Consolidated Financial Statements of the Nestl Group 2014

(883)

24

24

19

(74)

14

(60)

50

50

33

33

(24 122)

(27)

(21 551)

(50)

(24 149)

(21 601)

95

10. Employee benefits

The major categories of plan assets as a percentage of total plan assets of the Groups
defined benefit plans are as follows:

2014

2013

32%

36%

of which US equities

13%

14%

of which European equities

10%

12%

9%

10%

38%

33%

of which government debts

26%

23%

of which corporate debts

12%

10%

Equities

of which other equities


Debts

Real estate
Alternative investments
of which hedge funds

9%

8%

18%

19%

10%

11%

of which private equities

6%

6%

of which commodities

2%

2%

3%

4%

Cash/Deposits

Equity, debts and commodities represent 72% (2013: 71%) of the plan assets. Almost all
of them are quoted in an active market. Real estate, hedge funds and private equities
represent 25% (2013: 25%) of the plan assets. Almost all of them are not quoted in
an active market.
The plan assets of funded defined benefit plans include property occupied by affiliated
companies with a fair value of CHF11million (2013: CHF9million). Furthermore, funded
defined benefit plans are invested in Nestl S.A. (or related) shares to the extent
of CHF 47 million (2013: CHF44million). The Groups investment management principles
allow such investment only when the position in Nestl S.A. (or related) shares is passive,
i.e. in line with the weighting in the underlying benchmark.
The Group expects to contribute CHF698million to its funded defined benefit plans
in 2015.

10.5 Movement in unrecognised assets and minimum funding requirements


In millions of CHF

Post-employment
medical benefits
and other benefits

Total

Defined benefit
retirement plans

Post-employment
medical benefits
and other benefits

Total

2013

Defined benefit
retirement plans

2014

106

106

42

42

Currency retranslations

(2)

Limitation of interest income

Changes due to asset ceiling

(78)

(78)

64

64

At 31 December

34

34

106

106

At 1 January

96

(2)

Consolidated Financial Statements of the Nestl Group 2014

10. Employee benefits

10.6 Expenses recognised in the income statement


In millions of CHF

Post-employment
medical benefits
and other benefits

(25)

675

343

(80)

263

(144)

(135)

(135)

Net interest (income)/expense

95

99

194

150

98

248

Administration expenses

24

24

19

19

675

74

749

377

18

395

Employees contributions

Defined benefit expenses


Defined contribution expenses
Total

Total

Defined benefit
retirement plans

700
(144)

Service cost

Total

Post-employment
medical benefits
and other benefits

2013

Defined benefit
retirement plans

2014

275

260

1 024

655

The expenses for defined benefit and defined contribution plans are allocated to the
appropriate headings of expenses by function.

10.7 Remeasurement of defined benefit plans reported in other comprehensive


income
In millions of CHF

Actual return on plan assets, excluding interest income


Experience adjustments on plan liabilities
Change in demographic assumptions on plan liabilities
Change in financial assumptions on plan liabilities
Transfer from/(to) unrecognised assets and other
Remeasurement of defined benefit plans

Consolidated Financial Statements of the Nestl Group 2014

44

(35)

(3 074)

(127)

78

(1 594)

(151)

(99)
9
(3 201)
78
(1 745)

Total

1 468

10

Post-employment
medical benefits
and other benefits

(109)

2013
Defined benefit
retirement plans

Total

1 467

Defined benefit
retirement plans

Post-employment
medical benefits
and other benefits

2014

952

(2)

950

(187)

(65)

(252)

(649)

(20)

1 416

251

(64)

1 468

164

(669)
1 667
(64)
1 632

97

10. Employee benefits

10.8 Principal financial actuarial assumptions


The principal financial actuarial assumptions are presented by geographic area. Each item
is a weighted average in relation to the relevant underlying component.

Americas

Asia, Oceania
and Africa

Total

Europe

Americas

Asia, Oceania
and Africa

Total

2013

Europe

2014

Discount rates

2.2%

5.1%

4.4%

3.1%

3.4%

5.8%

4.7%

4.1%

Expected rates of salary increases

2.8%

2.9%

4.7%

3.0%

2.9%

2.9%

5.0%

3.2%

Expected rates of pension adjustments

1.4%

0.6%

1.8%

1.3%

1.8%

0.6%

1.8%

1.5%

Medical cost trend rates

5.8%

5.7%

6.0%

5.9%

10.9 Mortality tables and life expectancies by geographic area for Groups
major defined benefit pension plans

2014

Country

Mortality table

2013

Life expectancy at age 65


for a male member
currently aged 65 (in years)

2014

2013

Life expectancy at age 65


for a female member
currently aged 65 (in years)

Europe
Switzerland

LPP 2010

20.8

20.7

23.1

23.1

United Kingdom

S1NA CMI 2013

21.8

21.7

23.2

23.1

Germany

Heubeck-Richttafeln 2005 G
modifiziert

20.1

21.3

23.6

22.8

RP-2014

21.1

19.3

23.1

21.1

Americas
USA

Life expectancy is reflected in the defined benefit obligations by using mortality tables
of the country in which the plan is located. When those tables no longer reflect recent
experience, they are adjusted by appropriate loadings.

98

Consolidated Financial Statements of the Nestl Group 2014

10. Employee benefits

10.10 Sensitivity analyses on present value of defined benefit obligations


by geographic area
The table below gives the present value of the defined benefit obligations when major
assumptions are changed.
In millions of CHF

Americas

Asia, Oceania
and Africa

Total

Europe

Americas

Asia, Oceania
and Africa

Total

2013

Europe

2014

21 133

7 312

2 282

30 727

18 099

6 007

2 125

26 231

Increase of 50 basis points

19 482

6 910

2 196

28 588

16 797

5 672

2 028

24 497

Decrease of 50 basis points

22 923

7 748

2 380

33 051

19 563

6 370

2 231

28 164

Increase of 50 basis points

21 319

7 386

2 321

31 026

18 288

6 062

2 162

26 512

Decrease of 50 basis points

20 960

7 243

2 248

30 451

17 921

5 956

2 091

25 968

Increase of 50 basis points

22 395

7 566

2 337

32 298

19 088

6 212

2 180

27 480

Decrease of 50 basis points

19 950

7 268

2 264

29 482

17 182

5 968

2 097

25 247

Increase of 50 basis points

21 133

7 355

2 285

30 773

18 099

6 056

2 127

26 282

Decrease of 50 basis points

21 132

7 275

2 279

30 686

18 099

5 967

2 122

26 188

Setting forward the tables by 1 year

20 434

7 174

2 251

29 859

17 547

5 829

2 096

25 472

Setting back the tables by 1 year

21 827

7 451

2 311

31 589

18 649

6 186

2 152

26 987

As reported
Discount rates

Expected rates of salary increases

Expected rates of pension adjustments

Medical cost trend rates

Mortality assumption

All sensitivities are calculated using the same actuarial method as for the disclosed
present value of the defined benefit obligations at year-end.

10.11 Weighted average duration of defined benefit obligations


by geographic area
Expressed in years

Americas

Asia, Oceania
and Africa

Total

Europe

Americas

Asia, Oceania
and Africa

Total

At 31 December

2013

Europe

2014

16.6

12.1

9.8

15.0

15.8

12.3

10.0

14.5

Consolidated Financial Statements of the Nestl Group 2014

99

11. Equity compensation plans


Certain Group employees are eligible to receive long-term incentives in the form of equity
compensation plans.
Equity compensation plans are settled either by remittance of Nestl S.A. shares
(accounted for as equity-settled share-based payment transactions) or by the payment
of an equivalent amount in cash (accounted for as cash-settled share-based payment
transactions).
In millions of CHF
2014

2013

Equity-settled share-based payment costs

(156)

(155)

Cash-settled share-based payment costs

(49)

(53)

(205)

(208)

of which RSUP

(137)

(193)

of which PSUP

(66)

(10)

Total share-based payment costs

The share-based payment costs are allocated to the appropriate headings of expenses
by function in the income statement.
Restricted Stock Unit Plan (RSUP)
Members of Group Management are awarded Restricted Stock Units (RSU) that entitle
participants to receive freely disposable NestlS.A. shares (accounted for as equity-settled
share-based payment transactions) or an equivalent amount in cash (accounted for as
cash-settled share-based payment transactions) at the end of a three-year restriction period.
In 2014, the grant has been limited to members of the US affiliated companies.
Number of RSU in millions of units
2014

2013

Outstanding at 1 January

9.9

10.0

Granted

0.5

3.3

Settled

(3.4)

(3.3)

Forfeited

(0.1)

(0.1)

Outstanding at 31 December

6.9

9.9

of which vested at 31 December

0.7

0.4

of which cash-settled at 31 December

2.0

1.9

The fair value of equity-settled RSU is determined on the basis of the market price of
Nestl S.A. shares at grant date, discounted at a risk-free interest rate and adjusted for the
dividends that participants are not entitled to receive during the restricted period of three
years. There were no equity-settled RSU granted in 2014 (the weighted average fair value
of the equity-settled RSU granted in 2013 was CHF 58.58).
For cash-settled outstanding RSU, the liability is re-measured at each reporting date
based on subsequent changes in the market price of Nestl S.A. shares. The average
fair value of the cash-settled RSU outstanding at 31December 2014 is CHF 70.74
(2013: CHF 63.36).
Performance Share Unit Plan (PSUP)
Members of the Executive Board and, as from 2014, members of Group Management are
awarded Performance Share Units (PSU) that entitle participants to receive freely
disposable Nestl S.A. shares (accounted for as equity-settled share-based payment
transactions) or an equivalent amount in cash (accounted for as cash-settled share-based
payment transactions) at the end of a three-year restriction period.
100

Consolidated Financial Statements of the Nestl Group 2014

11. Equity compensation plans

Upon vesting, the number of shares delivered ranges from 0% to 200% of the initial grant
and is determined by the degree by which the performance measures of the PSUP have
been met. These measures are the relative Total Shareholder Return of the Nestl S.A.
share in relation to the STOXX Europe 600 Food & Beverage Net Return Index (as from 2014
the STOXX Global 1800 Food & Beverage Net Return Index); and the growth of the
underlying earnings per share in constant currencies. Each of the two measures has
equal weighting in determining the vesting level of the initial PSU award.
Number of PSU in millions of units
2014

2013

Outstanding at 1 January

0.4

0.3

Granted

2.8

0.2

Settled

(0.2)

(0.1)

Forfeited
Outstanding at 31 December
of which vested at 31 December
of which cash-settled at 31 December

3.0

0.4

0.1

The fair value of the equity-settled PSU is determined using a valuation model which
reflects the probability of overachievement or underachievement on the Total Shareholder
Return measure, which is a market condition, and based on five-year historical data. The
other inputs incorporated into the valuation model comprise the market price of Nestl S.A.
shares at grant date, discounted at a risk-free interest rate and adjusted for the dividends
that participants are not entitled to receive during the restricted period of three years. The
weighted average fair value of the equity-settled PSU granted in 2014 is CHF 63.70
(2013: 64.44).
For cash-settled outstanding PSU, the liability is re-measured at each reporting date
based on subsequent changes in the market price of Nestl S.A. shares. The average fair
value of the cash-settled PSU outstanding at 31 December 2014 is CHF 74.28 (2013: nil).

Consolidated Financial Statements of the Nestl Group 2014

101

12. Provisions and contingencies


12.1 Provisions
In millions of CHF
At 1 January 2013
Currency retranslations
Provisions made during the year (a)
Amounts used
Reversal of unused amounts
Modification of the scope of consolidation
At 31 December 2013

Restructuring

Environmental

Litigation

Other

479

18

2 333

449

Provisions made during the year (a)

(95)

(1)

(78)

(16)

244

455

162

862

(167)

(2)

(205)

(85)

(459)

(35)

(1)

(258)

(63)

(357)

(1)

521

15

2 246

455

3 237

(4)

67

65

251

488

175

920

523

of which expected to be settled within 12 months


Currency retranslations

Total
3 279

(173)

(1)

(92)

(86)

(352)

Reversal of unused amounts

(54)

(94)

(30)

(178)

Reclassified as held for sale

(4)

59

108

168

542

21

2 670

623

3 856

Amounts used

Modification of the scope of consolidation


At 31 December 2014

(4)

695

of which expected to be settled within 12 months


(a) Including discounting of provisions.

Restructuring
Restructuring provisions arise from a number of projects across the Group. These include
plans to optimise production, sales and administration structures, mainly in Europe.
Restructuring provisions are expected to result in future cash outflows when implementing
the plans (usually over the following two to three years).
Litigation
Litigation provisions have been set up to cover tax, legal and administrative proceedings
that arise in the ordinary course of the business. These provisions cover numerous separate
cases whose detailed disclosure could be detrimental to the Group interests. The Group
does not believe that any of these litigation proceedings will have a material adverse impact
on its financial position. The timing of outflows is uncertain as it depends upon the outcome
of the proceedings. In that instance, these provisions are not discounted because their
present value would not represent meaningful information. Group Management does not
believe it is possible to make assumptions on the evolution of the cases beyond the balance
sheet date.
Other
Other provisions are mainly constituted by onerous contracts and various damage claims
having occurred during the year but not covered by insurance companies. Onerous
contracts result from unfavourable leases, breach of contracts or supply agreements
above market prices in which the unavoidable costs of meeting the obligations under the
contracts exceed the economic benefits expected to be received or for which no benefits
are expected to be received.

102

Consolidated Financial Statements of the Nestl Group 2014

12. Provisions and contingencies

12.2 Contingencies
The Group is exposed to contingent liabilities amounting to a maximum potential
payment of CHF2012million (2013: CHF1669million) representing potential litigations
of CHF1914million (2013:CHF1658million) and other items of CHF98million
(2013:CHF11million). Potential litigations relate mainly to labour, civil and tax litigations
in Latin America.
Contingent assets for litigation claims in favour of the Group amount to a maximum
potential recoverable amount of CHF176million (2013:CHF51million).

Consolidated Financial Statements of the Nestl Group 2014

103

13. Financial instruments


13.1 Financial assets and liabilities
13.1a By class and by category
In millions of CHF

At fair value
to income statement

Available for sale

Total
categories

Loans, receivables
and liabilities at
amortised cost (a)

At fair value
to income statement

Available for sale

Total
categories

2013

Loans, receivables
and liabilities at
amortised cost (a)

2014

3 528

3 528

4 524

4 524

Commercial paper

2 000

2 000

98

98

Time deposits

2 678

2 678

2 009

2 009

Bonds and debt funds

338

3 187

3 525

304

2 569

2 873

Equity and equity funds

394

199

593

356

161

517

1 028

44

978

2 050

639

38

905

1 582

Classes
Cash at bank and in hand

Other financial assets


Liquid assets (b) and non-current

4 556

776

9 042

14 374

5 163

698

5 742

11 603

13 459

13 459

12 206

12 206

400

400

230

230

Total financial assets

18 015

1 176

9 042

28 233

17 369

928

5 742

24 039

Trade and other payables

(19 279)

(19 279)

(17 459)

(17 459)

Financial debt

(21 206)

(21 206)

(21 743)

(21 743)

(757)

(757)

(381)

(381)

Total financial liabilities

(40 485)

(757)

(41 242)

(39 202)

(381)

(39 583)

Net financial position

(22 470)

419

9 042

(13 009)

(21 833)

547

5 742

(15 544)

of which at fair value

419

9 042

547

5 742

financial assets
Trade and other receivables
Derivative assets (c)

Derivative liabilities (c)

9 461

6 289

(a) Carrying amount of these instruments is a reasonable approximation of their fair value. For bonds included in financial debt,
see Note 13.1c.
(b) Liquid assets are composed of cash and cash equivalents and short-term investments.
(c) Include derivatives held in hedge relationships and those that are undesignated (categorised as held-for-trading),
see Note 13.1d.

104

Consolidated Financial Statements of the Nestl Group 2014

13. Financial instruments

13.1b Fair value hierarchy of financial instruments


In millions of CHF
2014
Derivative assets

2013

29

47

Bonds and debt funds

824

746

Equity and equity funds

280

249

Other financial assets


Derivative liabilities
Prices quoted in active markets (Level 1)

25

24

(116)

(44)

1 042

1 022

Commercial paper

2 000

98

Time deposits

2 678

2 009

Derivative assets

371

183

2 671

2 091

Equity and equity funds

279

245

Other financial assets

852

804

Derivative liabilities

(641)

(337)

Bonds and debt funds

Valuation techniques based on observable market data (Level 2)


Valuation techniques based on unobservable input (Level 3)
Total financial instruments at fair value

8 210

5 093

209

174

9 461

6 289

There have been no significant transfers between the different hierarchy levels in 2014.

Consolidated Financial Statements of the Nestl Group 2014

105

13. Financial instruments

13.1c Bonds

Coupon

Effective
interest
rate

Year of
issue/
maturity

USD

550

2.13%

2.13%

20102014

AUD

275

5.50%

5.69%

20112016

USD

200

2.00%

2.06%

20112016

NOK

1 000

3.38%

3.59%

20112016

AUD

200

4.00%

4.11%

NOK

1 000

2.25%

NOK

3 000

USD

Issuer
Nestl Holdings, Inc., USA

Nestl Finance International Ltd, Luxembourg

Other bonds
Total carrying amount

(*)

of which due within one year


of which due after one year
Fair value (*) of bonds, based on prices quoted in active markets

Comments

Face value
in millions

In millions of CHF

2014

2013

489

232

229

198

178

(a)

137

150

20122017

(b)

161

158

2.31%

20122017

(b)

133

146

2.50%

2.66%

20122017

(b)

398

437

900

1.38%

1.46%

20122017

889

799

GBP

250

1.63%

1.71%

20132017

(a)

385

364

CHF

250

2.63%

2.66%

20072018

(a)

271

270

USD

500

1.25%

1.32%

20122018

494

444

AUD

175

3.75%

3.84%

20132018

(a)

145

138

AUD

200

3.88%

4.08%

20132018

(b)

161

157

AUD

400

4.13%

4.33%

20132018

(c)

326

315

USD

400

1.38%

1.50%

20132018

394

354

USD

500

2.00%

2.17%

20132019

491

441

USD

500

2.25%

2.41%

20132019

492

441

USD

400

2.00%

2.06%

20142019

395

USD

650

2.13%

2.27%

20142020

639

AUD

250

4.25%

4.43%

20142020

215

AUD

175

3.63%

3.77%

20142020

(a)

148

NOK

1 000

2.75%

2.85%

20142020

(a)

139

CHF

425

2.00%

2.03%

20092014

425

CHF

275

2.13%

2.13%

20092014

(d)

275

AUD

450

5.75%

5.81%

20102014

(a)

371

NOK

1 250

2.50%

2.73%

20102014

(a)

183

CHF

350

2.13%

2.20%

20092015

(d)

350

350

EUR

500

0.75%

0.83%

20122016

601

612

AUD

125

4.63%

4.86%

20122017

EUR

500

1.50%

1.61%

EUR

500

1.25%

EUR

500

2.13%

EUR

500

EUR
GBP

(a)

(a)

101

98

20122019

599

610

1.30%

20132020

600

611

2.20%

20132021

598

610

0.75%

0.90%

20142021

595

850

1.75%

1.89%

20122022

1 012

1 030

400

2.25%

2.34%

20122023

622

539

(b)

(e)

336

316

12 257

11 540

409

1 752

11 848

9 788

12 651

11 566

(*) Carrying amount and fair value of bonds exclude accrued interest.

106

Consolidated Financial Statements of the Nestl Group 2014

13. Financial instruments

Several bonds are hedged by currency and/or interest derivatives. The fair value of these
derivatives is shown under derivative assets for CHF87million (2013:CHF101million) and
under derivative liabilities for CHF359million (2013:CHF152million).
(a) Subject to an interest rate and/or currency swap that creates a liability at floating rates in the currency of the issuer.
(b) Subject to an interest rate and currency swap that creates a liability at fixed rates in the currency of the issuer.
(c) This bond is composed of:
AUD 300 million subject to an interest rate and currency swap that creates a liability at fixed rates in the currency of the
issuer; and
AUD 100 million subject to an interest rate and/or currency swap that creates a liability at floating rates in the currency of
the issuer.
(d) Subject to currency swaps that hedge the CHF face value and coupon exposure.
(e) Subject to an interest rate swap.

13.1d Derivative assets and liabilities


By type
In millions of CHF

Fair value
liabilities

Contractual
or notional
amounts

Fair value
assets

3 967

122

14

4 198

14

27

616

588

48

2 892

77

359

3 009

99

104

Currency forwards, futures, swaps and options

6 556

152

82

4 397

62

39

Interest rate forwards, futures and swaps

1 534

122

1 379

103

Commodity futures and options

1 600

31

159

1 142

46

46

1 212

13

677

100

96

47

18 484

400

757

15 533

230

381

Fair value
liabilities

Fair value
assets

2013

Contractual
or notional
amounts

2014

Fair value hedges


Currency forwards, futures and swaps
Interest rate forwards, futures and swaps
Interest rate and currency swaps
Cash flow hedges

Undesignated derivatives
Currency forwards, futures, swaps and options
Interest rate forwards, futures, swaps and options
Commodity futures and options

Conditional offsets (a)


Derivative assets and liabilities
Use of cash collateral received or deposited
Balances after conditional offsets

(84)

(84)

(48)

(5)

(358)

311

315

182

(48)
(90)
243

(a) Represent amounts that would be offset in case of default, insolvency or bankruptcy of counterparties.

Some derivatives, while complying with the Groups financial risk management policies
of managing the risks of the volatility of the financial markets, do not qualify for hedge
accounting and are therefore classified as undesignated derivatives.

Consolidated Financial Statements of the Nestl Group 2014

107

13. Financial instruments

Impact on the income statement of fair value hedges


In millions of CHF
2014

2013

on hedged items

(107)

476

on hedging instruments

107

(497)

Ineffective portion of gains/(losses) of cash flow hedges and net investment hedges is not
significant.
13.2 Financial risks
In the course of its business, the Group is exposed to a number of financial risks: credit
risk, liquidity risk, market risk (including foreign currency risk and interest rate risk,
commodity price risk and equity price risk). This note presents the Groups objectives,
policies and processes for managing its financial risk and capital.
Financial risk management is an integral part of the way the Group is managed. The
Board of Directors determines the financial control principles as well as the principles
of financial planning. The Chief Executive Officer organises, manages and monitors all
financial risks, including asset and liability matters.
The Asset and Liability Management Committee (ALMC), under the supervision of
the Chief Financial Officer, is the governing body for the establishment and subsequent
execution of the Nestl Groups Financial Asset and Liability Management Policy. It ensures
implementation of strategies and achievement of objectives of the Groups financial asset
and liabilities management, which are executed by the Centre Treasury, the Regional
Treasury Centres and, in specific local circumstances, by the affiliated companies. The
activities of the Centre Treasury and of the Regional Treasury Centres are supervised by
an independent Middle Office, which verifies the compliance of the strategies proposed
and/or operations executed within the approved guidelines and limits set by the ALMC.
Approved Treasury Management Guidelines define and classify risks as well as determine,
by category of transaction, specific approval, execution and monitoring procedures.
In accordance with the aforementioned policies, the Group only enters into derivative
transactions relating to assets, liabilities or anticipated future transactions.
13.2a Credit risk
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Group. Credit risk arises on liquid assets, non-current
financial assets, derivative assets, trade and other receivables.
The Group aims to minimise its financial credit risk through the application of risk
management policies. Credit limits are set based on a counterparty value and a probability
of default. The methodology used to set the list of counterparty limits includes Enterprise
Value (EV), counterparty Credit Ratings (CR) and Credit Default Swaps (CDS). Evolution
of counterparties is monitored daily, taking into consideration EV, CR and CDS evolution.
As a result of this daily review, changes on credit limits and risk allocation are carried out.
The Group avoids the concentration of credit risk on its liquid assets by spreading them
over several institutions and sectors.
Trade receivables are subject to credit limits, control and approval procedures in all
the affiliated companies. Due to its large geographic base and number of customers, the
Group is not exposed to material concentrations of credit risk on its trade receivables
(see Note 7). Nevertheless global commercial counterparties are constantly monitored
following the same methodology used for financial counterparties.
108

Consolidated Financial Statements of the Nestl Group 2014

13. Financial instruments

The maximum exposure to credit risk resulting from financial activities, without
considering netting agreements and without taking into account any collateral held or
other credit enhancements, is equal to the carrying amount of the Groups financial assets.
Credit rating of financial assets
This includes liquid assets, non-current financial assets and derivative assets.
In millions of CHF
2014

2013

11 895

8 751

Investment grade BBB+, BBB and BBB

1 432

1 474

Non-investment grade (BB+ and below)

273

368

1 174

1 240

14 774

11 833

Investment grade A and above

Not rated (a)

(a) Mainly equity securities and other investments for which no credit rating is available.

The source of the credit ratings is Standard & Poors; if not available, the Group uses other
credit rating equivalents. The Group deals mainly with financial institutions located in
Switzerland, the European Union and North America.
13.2b Liquidity risk
Liquidity risk management
Liquidity risk is the risk that a company may encounter difficulties in meeting its obligations
associated with financial liabilities that are settled by delivering cash or other financial assets.
Such risk may result from inadequate market depth or disruption or refinancing problems.
The Groups objective is to manage this risk by limiting exposures in financial instruments
that may be affected by liquidity problems and by maintaining sufficient back-up facilities.
The Group does not expect any refinancing issues and has successfully completed
a EUR 6.0 billion 12-months revolving credit facility replacing an older facility
of EUR 5.0 billion. Additionally, the Group successfully extended the EUR 5.0 billion
revolving credit facility to October 2019, which originally matured in 2018. The facility
currently serves primarily as a backstop to its short-term debt. In total, the Groups
revolving credit facilities amount to EUR 11.0 billion.

Consolidated Financial Statements of the Nestl Group 2014

109

13. Financial instruments

Contractual maturities of financial liabilities and derivatives (including interest)

2014

Financial assets
Trade and other payables
Commercial paper (a)
Bonds (a)

27 833
(17 437)
(5 573)
(672)

(357)

(1 419)

(60)

(6 403)

(1 474)

(5 042)

(19 328)

(19 279)

(5 573)

(5 569)

(13 536)

(12 257)

Other financial debt

(2 963)

(203)

(326)

(115)

(3 607)

(3 380)

Total financial debt

(9 208)

(1 622)

(6 729)

(5 157)

(22 716)

(21 206)

(26 645)

(1 979)

(6 789)

(6 631)

(42 044)

(40 485)

Financial liabilities
Non-currency derivative assets
Non-currency derivative liabilities

39

(6)

41

41

(215)

(29)

(42)

(7)

(293)

(289)

Gross amount receivable from currency derivatives

11 589

458

2 204

495

14 746

14 553

Gross amount payable from currency derivatives

(11 370)

(489)

(2 435)

(550)

(14 844)

(14 662)

43

(55)

(270)

(68)

(350)

(357)

(105)

(29)

(42)

(7)

(183)

Net derivatives
Net financial position
of which derivatives under cash flow hedges (b)
2013

Carrying amount

Contractual
amount

After the fifth year

In the third
to the fifth year

In the second year

In the first year

In millions of CHF

(13 009)

Financial assets
Trade and other payables

(180)
23 809

(16 072)

(176)

(55)

(1 216)

(17 519)

Commercial paper (a)

(7 243)

(7 243)

(7 241)

Bonds (a)

(2 002)

(622)

(5 377)

(4 867)

(12 868)

(11 540)

Other financial debt

(17 459)

(2 529)

(227)

(330)

(106)

(3 192)

(2 962)

Total financial debt

(11 774)

(849)

(5 707)

(4 973)

(23 303)

(21 743)

Financial liabilities

(27 846)

(1 025)

(5 762)

(6 189)

(40 822)

(39 202)

Non-currency derivative assets


Non-currency derivative liabilities
Gross amount receivable from currency derivatives
Gross amount payable from currency derivatives
Net derivatives

48

48

(85)

(45)

(44)

(45)

(219)

10 096

77

2 402

12 575

12 544

(10 040)

(22)

(2 500)

(12 562)

(12 535)

19

10

(142)

(45)

(158)

(151)

(20)

(40)

(28)

(80)

Net financial position


of which derivatives under cash flow hedges (b)

48
(208)

(15 544)
(80)

(a) Commercial paper of CHF 3571 million (2013: CHF 6483 million) and bonds of CHF76 million (2013: CHF551million) have
maturities of less than three months.
(b) The periods when the cash flow hedges affect the income statement do not differ significantly from the maturities disclosed
above.

110

Consolidated Financial Statements of the Nestl Group 2014

13. Financial instruments

13.2c Market risk


The Group is exposed to risk from movements in foreign currency exchange rates,
interest rates and market prices that affect its assets, liabilities and anticipated future
transactions.
Foreign currency risk
The Group is exposed to foreign currency risk from transactions and translation.
Transactional exposures arise from transactions in foreign currency. They are managed
within a prudent and systematic hedging policy in accordance with the Groups specific
business needs through the use of currency forwards, futures, swaps and options.
Exchange differences recorded in the income statement represented a loss
of CHF 47 million in 2014 (2013: loss of CHF173million). They are allocated to the
appropriate headings of expenses by function.
Translation exposure arises from the consolidation of the financial statements
of foreign operations in Swiss francs, which is, in principle, not hedged.
Interest rate risk
The Group is exposed primarily to fluctuation in USD and EUR interest rates. Interest rate
risk on financial debt is managed based on duration and interest management targets set
by the ALMC through the use of fixed rate debt and interest rate swaps.
Taking into account the impact of interest derivatives, the proportion of financial debt
subject to fixed interest rates for a period longer than one year represents 54% (2013: 46%).
Price risk
Commodity price risk
Commodity price risk arises from transactions on the world commodity markets for
securing the supplies of green coffee, cocoa beans and other commodities necessary
for the manufacture of some of the Groups products.
The Groups objective is to minimise the impact of commodity price fluctuations and
this exposure is hedged in accordance with the Nestl Group policy on commodity price
risk management. The regional Commodity Purchasing Competence Centres are
responsible for managing commodity price risk on the basis of internal directives and
centrally determined limits. They ensure that the Group benefits from hedges generally
through the use of exchange-traded commodity derivatives. The commodity price risk
exposure of anticipated future purchases is managed using a combination of derivatives
(mainly futures and options) and executory contracts. As a result of the short product
business cycle of the Group, the majority of the anticipated future raw material transactions
outstanding at the balance sheet date are expected to occur in the next year.
Equity price risk
The Group is exposed to equity price risk on investments. To manage the price risk
arising from these investments, the Group diversifies its portfolios in accordance with
the Guidelines set by the Board of Directors.

Consolidated Financial Statements of the Nestl Group 2014

111

13. Financial instruments

13.2d Value at Risk (VaR)


Description of the method
The VaR is a single measure to assess market risk. The VaR estimates the size of losses
given current positions and possible changes in financial markets. The Group uses
simulation to calculate VaR based on the historic data for a 250-day period. The VaR
calculation is based on 95% confidence level and, accordingly, does not take into
account losses that might occur beyond this level of confidence. The VaR is calculated
on the basis of unhedged exposures outstanding at the close of business and does not
necessarily reflect intra-day exposures.
Objective of the method
The Group uses the described VaR analysis to estimate the potential one-day loss in the
fair value of its financial and commodity instruments. The Group cannot predict the
actual future movements in market rates and prices, therefore the below VaR numbers
neither represent actual losses nor consider the effects of favourable movements in
underlying variables. Accordingly, these VaR numbers may only be considered indicative
of future movements to the extent the historic market patterns repeat in the future.
VaR figures
The VaR computation includes the Groups financial assets and liabilities that are subject
to foreign currency, interest rate and price risk.
The estimated potential one-day loss from the Groups foreign currency, interest rate
and equity price risk sensitive instruments, as calculated using the above described
historic VaR model, is as follows:
In millions of CHF
2014
Foreign currency

2013

Interest rate

Equity price

Foreign currency, interest rate and security price combined

The estimated potential one-day loss from the Groups commodity price risk sensitive
instruments, as calculated using the above described historic VaR model, is not significant.
13.2e Capital risk management
The Groups capital management is driven by the impact on shareholders of the level of
total capital employed. It is the Groups policy to maintain a sound capital base to support
the continued development of its business.
The Board of Directors seeks to maintain a prudent balance between different
components of the Groups capital. The ALMC monitors the capital structure and the net
financial debt by currency. Net financial debt is defined as current and non-current
financial liabilities less cash and cash equivalent and short-term investments.
The operating cash flow-to-net financial debt ratio highlights the ability of a business
to repay its debts. As at 31December 2014, the ratio was 119.3% (2013: 102.1%).
The Groups subsidiaries have complied with local statutory capital requirements as
appropriate.

112

Consolidated Financial Statements of the Nestl Group 2014

14. Taxes
14.1 Taxes recognised in the income statement
In millions of CHF
2014

2013

(3 148)

(2 970)

Components of taxes
Current taxes (a)
Deferred taxes

132

(846)

Taxes reclassified to other comprehensive income

(357)

558

Taxes reclassified to equity


Total taxes

(3 367)

(3 256)

(2 245)

(2 812)

Reconciliation of taxes
Expected tax expense at weighted average applicable tax rate
Tax effect of non-deductible or non-taxable items
Prior years' taxes
Transfers to unrecognised deferred tax assets
Transfers from unrecognised deferred tax assets
Changes in tax rates

(527)
92
(136)

(8)
243
(59)

12

(15)

Withholding taxes levied on transfers of income

(357)

Other

(215)

(230)

(3 367)

(3 256)

2014

2013

Currency retranslations

39

317

Fair value adjustments on available-for-sale financial instruments

(48)

64

Fair value adjustments on cash flow hedges

14

(91)

Total taxes

(381)

(a) Current taxes related to prior years represent a tax income of CHF 133 million (2013: tax income of CHF 172 million).

The expected tax expense at weighted average applicable tax rate is the result from
applying the domestic statutory tax rates to profits before taxes of each entity in the country
it operates. For the Group, the weighted average applicable tax rate varies from one year
to the other depending on the relative weight of the profit of each individual entity in the
Groups profit as well as the changes in the statutory tax rates.

14.2 Taxes recognised in other comprehensive income


In millions of CHF
Tax effects relating to

Remeasurement of defined benefit plans

Consolidated Financial Statements of the Nestl Group 2014

352

(848)

357

(558)

113

14. Taxes

14.3 Reconciliation of deferred taxes by type of temporary differences recognised


on the balance sheet

Unused tax losses and


unused tax credits

(1 549)

2 396

855

450

15

659

53

31

(68)

(47)

(47)

(79)

(157)

Total

Inventories,
receivables,
payables and
provisions

(1 508)

Other

Employee benefits

Currency retranslations

Goodwill and
intangible assets

At 1 January 2013

Property, plant
and equipment

In millions of CHF

(80)

(94)

(871)

52

38

109

(846)

Reclassified as held for sale

(10)

(3)

(13)

Modification of the scope of consolidation

36

(1)

(3)

(1)

(74)

(43)

(1 499)

(1 612)

1 456

857

430

(32)

(400)

Currency retranslations

(96)

(142)

81

29

(17)

(81)

(226)

Deferred tax (expense)/income

(63)

39

257

96

(82)

(115)

132

12

13

(4)

(3)

(14)

(811)

32

93

58

(15)

(657)

(1 660)

(2 513)

1 826

1 075

385

(246)

(1 133)

Deferred tax (expense)/income

At 31 December 2013

Reclassified as held for sale


Modification of the scope of consolidation
At 31 December 2014

18

In millions of CHF
2014

2013

Reflected in the balance sheet as follows:


Deferred tax assets

2 058

2 243

Deferred tax liabilities

(3 191)

(2 643)

(1 133)

(400)

2014

2013

Net assets/(liabilities)

14.4 Unrecognised deferred taxes


The deductible temporary differences as well as the unused tax losses and tax credits for
which no deferred tax assets are recognised expire as follows:
In millions of CHF
Within one year
Between one and five years
More than five years

35

18

331

365

2 375

1 642

2 741

2 025

At 31 December 2014, the unrecognised deferred tax assets amount to CHF 629 million
(2013: CHF 512 million). In addition, the Group has not recognised deferred tax liabilities
in respect of unremitted earnings that are considered indefinitely reinvested in foreign
subsidiaries. At 31December 2014, these earnings amount to CHF20.0billion
(2013: CHF 17.1 billion). They could be subject to withholding and other taxes on
remittance.

114

Consolidated Financial Statements of the Nestl Group 2014

15. Associates and joint ventures


In millions of CHF
2014

At 1 January
Currency retranslations
Investments
Divestments (a)
Share of results
Impairment
Share of other comprehensive income
Dividends and interest received
Other (b)
At 31 December

L'Oral
9 525

Other
associates
1 156

2013

Joint
ventures
1 634

Total
12 315

L'Oral
8 785

(160)

(2)

13

(149)

154

200

354

(2 585)

(167)

934

(63)

(43)

828

Other
associates
1 068

Joint
ventures
1 733

137

(3)

(45)

89

113

69

182

(2 752)

(7)

(147)

1 083

(9)

190

Total
11 586

(154)
1 264

(211)

(211)

(13)

(57)

(70)

115

(28)

87

(543)

(58)

(115)

(716)

(506)

(12)

(139)

33

25

(1 008)

(950)

(89)

7 191

1 001

457

9 525

1 156

1 634

8 649

(657)
(82)
12 315

(a) Relate to the 48.5 million of LOral shares sold to LOral (see Note 15.1).
(b) Relate mainly to the derecognition of the joint venture Galderma when the Group brought its ownership from 50% to 100%
(see Note 15.3).

Income from associates and joint ventures


In millions of CHF
Share of results
Impairment (a)

2014

2013

828

1 264

(211)

Profit on partial disposal of LOral shares (b)

4 569

Revaluation gain on the 50% shareholding already held in Galderma (c)

2 817

8 003

1 264

(a) A number of small associated companies have been impaired based on recent financial information and developments in
their business environments, none of which are individually significant.
(b) Includes a cumulative gain of CHF 436 million recognised by LOral in its other comprehensive reserves and a cumulative
loss of CHF 625 million recognised by the Group in its currency translation reserve that have been recycled to the income
statement.
(c) Includes a cumulative currency translation loss of CHF 56 million that has been recycled to the income statement.

15.1 LOral
The Group holds 129881021 shares in LOral, the world leader in cosmetics, representing
a 23.4% participation in its equity after elimination of its treasury shares (2013:178381021
shares representing a29.7% participation).
On 8 July 2014, the Group sold 48 500 000 shares to LOral for CHF 7342 million for
cancellation. As a result, the participation in its equity after elimination of its treasury
shares was reduced from 29.7% to 23.5%.
At 31 December 2014, the market value of the shares held amounts to CHF21.8billion
(2013: CHF27.9billion).

Consolidated Financial Statements of the Nestl Group 2014

115

15. Associates and joint ventures

Summarised financial information


In billions of CHF
2014

2013

Total current assets

10.6

11.4

Total non-current assets

28.0

26.9

Total assets

38.6

38.3

Total current liabilities

11.2

8.1

Total non-current liabilities

3.1

2.5

Total liabilities

14.3

10.6

Total equity

24.3

27.7

Total sales

27.4

28.2

Profit from continuing operations

3.4

3.5

Profit from discontinued operations (a)

2.6

0.1

Other comprehensive income

(0.1)

0.4

Total comprehensive income

5.9

4.0

(a) Relate mainly to the profit on disposal of Galderma.

Reconciliation of the share of results


In billions of CHF
2014

2013

Share held by the Group in the profit from continuing operations of LOral

0.9

1.1

Share held by the Group in the profit from discontinued operations of LOral (a)

0.6

Elimination of the profit on disposal of Galderma

(0.6)

Share of results of LOral

0.9

1.1

(a) Relate mainly to the profit on disposal of Galderma.

Reconciliation of the carrying amount


In billions of CHF
2014

2013

Share held by the Group in the equity of L'Oral

5.7

8.2

Goodwill and other adjustments

1.5

1.3

Carrying amount of L'Oral

7.2

9.5

116

Consolidated Financial Statements of the Nestl Group 2014

15. Associates and joint ventures

15.2 Other associates


The Group holds a number of other associates that are individually not material.
15.3 Joint ventures
The Group holds 50% of a number of joint ventures operating in the food and beverages
and in pharmaceutical activities. These joint ventures are individually not material for the
Group, the main ones being Galderma (until July 2014) and Cereal Partners Worldwide.
In July 2014, the Group brought its ownership in Galderma to 100% by acquiring the
remaining 50% stake from LOral. As from this date, Galderma is an affiliated company
that is fully consolidated (see Note 2).

16. Earnings per share


2014
Basic earnings per share (in CHF)
Net profit (in millions of CHF)
Weighted average number of shares outstanding (in millions of units)
Diluted earnings per share (in CHF)
Net profit, net of effects of dilutive potential ordinary shares (in millions of CHF)

2013

4.54

3.14

14 456

10 015

3 188

3 191

4.52

3.13

14 456

10 015

3 196

3 200

3 188

3 191

Weighted average number of shares outstanding, net of effects of dilutive potential ordinary shares
(in millions of units)
Reconciliation of weighted average number of shares outstanding (in millions of units)
Weighted average number of shares outstanding used to calculate basic earnings per share
Adjustment for share-based payment schemes, where dilutive
Weighted average number of shares outstanding used to calculate diluted earnings per share

3 196

3 200

17. Cash flow statement


17.1 Operating profit
In millions of CHF
2014

2013

Profit for the year

14 904

10 445

Income from associates and joint ventures

(8 003)

(1 264)

Taxes

3 367

3 256

Financial income

(135)

Financial expense

772

850

10 905

13 068

Consolidated Financial Statements of the Nestl Group 2014

(219)

117

17. Cash flow statement

17.2 Non-cash items of income and expense


In millions of CHF
Depreciation of property, plant and equipment
Impairment of property, plant and equipment

2014

2013

2 782

2 864

136

109

1 908

114

Amortisation of intangible assets

276

301

Impairment of intangible assets

23

34

509

1 188

Impairment of goodwill

Net result on disposal of businesses


Net result on disposal of assets

67

(34)

(577)

Equity compensation plans

156

154

Other

562

98

6 323

4 352

Non-cash items in financial assets and liabilities

17.3 Decrease/(increase) in working capital


In millions of CHF
2014

2013

Inventories

(534)

(157)

Trade and other receivables

(892)

(257)

Prepayments and accrued income

268

Trade and other payables

912

Accruals and deferred income

132

(48)
1 585
237

(114)

1 360

17.4 Variation of other operating assets and liabilities


In millions of CHF
2014

2013

Variation of employee benefits assets and liabilities

(324)

(887)

Variation of provisions

324

84

85

229

85

(574)

Other

17.5 Net cash flows from treasury activities


In millions of CHF
2014

2013

(518)

(505)

Interest and dividends received

73

105

Net cash flows from derivatives used to hedge foreign operations

75

29

Net cash flows from trading derivatives

14

Interest paid

(356)

118

20
(351)

Consolidated Financial Statements of the Nestl Group 2014

17. Cash flow statement

17.6 Reconciliation of free cash flow and net financial debt


In millions of CHF
2014

2013

Operating cash flow

14 700

14 992

Capital expenditure

(3 914)

(4 928)

(509)

(402)

Expenditure on intangible assets


Investments (net of divestments) in associates and joint ventures
Inflows from other investing activities
Outflows from other investing activities
Free cash flow
Acquisition of businesses

3 958
294
(392)
14 137
(1 986)

Financial liabilities and short-term investments acquired in business combinations

(229)

Disposal of businesses

321

Financial liabilities and short-term investments transferred on disposal of businesses

(28)
1 273
(421)
10 486
(321)
(1)
421

11

(49)

(337)

Dividend paid to shareholders of the parent

(6 863)

(6 552)

Purchase of treasury shares

(1 721)

(481)

Acquisition (net of disposal) of non-controlling interests

Sale of treasury shares

104

60

72

366

Outflows from non-current treasury investments

(137)

(244)

Dividends paid to non-controlling interests

(356)

(328)

Cash inflows from hedging derivatives on net debt

155

41

Currency retranslations and exchange differences

(998)

399

Reclassification of financial investments from non-current financial assets to net financial debt

Other movements
(Increase)/decrease of net financial debt
Net financial debt at beginning of year
Net financial debt at end of year

(94)
2 365

(90)
3 430

(14 690)

(18 120)

(12 325)

(14 690)

17.7 Cash and cash equivalents at end of year


In millions of CHF
2014

2013

Cash at bank and in hand

3 528

4 524

Time deposits (a)

2 513

1 829

Commercial paper (a)

1 407

62

7 448

6 415

(a) With maturity of three months or less as from the initial recognition.

Consolidated Financial Statements of the Nestl Group 2014

119

18. Equity
18.1 Share capital issued
The ordinary share capital of Nestl S.A. authorised, issued and fully paid is composed
of 3 224 800 000 registered shares with a nominal value of CHF 0.10 each. Each share
confers the right to one vote. No shareholder may be registered with the right to vote
for shares which it holds, directly or indirectly, in excess of 5% of the share capital.
Shareholders have the right to receive dividends.

18.2 Conditional share capital


The conditional capital of Nestl S.A. amounts to CHF10million as in the preceding year.
It confers the right to increase the ordinary share capital, through the exercise of conversion
or option rights in connection with debentures and other financial market instruments,
by a maximum of CHF10million by the issue of a maximum of 100000000 registered
shares with a nominal value of CHF 0.10 each. Thus the Board of Directors has at its disposal
a flexible instrument enabling it, if necessary, to finance the activities of the Company
through convertible debentures.

18.3 Treasury shares


Number of shares in millions of units
2014

2013

Trading

18.1

18.2

Share Buy-Back Programme

23.7

Long-Term Incentive Plans

14.6

17.0

56.4

35.2

Purpose of holding

At 31 December 2014, the treasury shares held by the Group represent 1.7% of the share
capital (2013: 1.1%). Their market value amounts to CHF 4113 million (2013: CHF 2300 million).

18.4 Number of shares outstanding


Number of shares in millions of units

At 1 January 2013

Shares
issued

Treasury
shares

Outstanding
shares
3 188.6

3 224.8

(36.2)

Purchase of treasury shares

(7.7)

(7.7)

Treasury shares delivered in respect of options exercised

1.3

1.3

Treasury shares delivered in respect of equity compensation plans

3.3

3.3

Treasury shares delivered in respect of the acquisition of a business

4.1

4.1

3 224.8

(35.2)

3 189.6
(26.5)

At 31 December 2013
Purchase of treasury shares

(26.5)

Sale of treasury shares

0.1

0.1

Treasury shares delivered in respect of options exercised

1.9

1.9

Treasury shares delivered in respect of equity compensation plans

3.3

At 31 December 2014

120

3 224.8

(56.4)

3.3
3 168.4

Consolidated Financial Statements of the Nestl Group 2014

18. Equity

18.5 Translation reserve


The translation reserve comprises the cumulative gains and losses arising from translating
the financial statements of foreign operations that use functional currencies other than
Swiss francs. It also includes the changes in the fair value of hedging instruments used
for net investments in foreign operations.

18.6 Retained earnings and other reserves


Retained earnings represent the cumulative profits as well as remeasurement of defined
benefit plans attributable to shareholders of the parent. Other reserves comprise the fair
value reserve and the hedging reserve attributable to shareholders of the parent.
The fair value reserve includes the gains and losses on remeasuring available-for-sale
financial instruments. At 31December 2014, the reserve is CHF250million positive
(2013:CHF50million positive).
The hedging reserve consists of the effective portion of the gains and losses on
hedging instruments related to hedged transactions that have not yet occurred.
At 31December2014, the reserve is CHF108million negative (2013:CHF42million
negative).

18.7 Non-controlling interests


The non-controlling interests comprise the portion of equity of subsidiaries that are not
owned, directly or indirectly, by Nestl S.A. These non-controlling interests are individually
not material for the Group.

Consolidated Financial Statements of the Nestl Group 2014

121

18. Equity

18.8 Other comprehensive income

Total attributable
to shareholders
of the parent

Non-controlling
interests

Total

107

3 663

186

187

(56)

(56)

(1 745)

(1 745)

(1 745)

357

357

Retained
earnings and
other reserves

3 556

Translation
reserve
2014

In millions of CHF

3 556

financial instruments

186

Fair value adjustments on cash flow hedges

(56)

Remeasurement of defined benefit plans

Taxes

Currency retranslations
Fair value adjustments on available-for-sale

357

Share of other comprehensive income of

(506)

(506)

Other comprehensive income for the year

3 556

(1 764)

1 792

108

Currency retranslations

(2 887)

(2 887)

(59)

(2 946)

financial instruments

(523)

(523)

(523)

Fair value adjustments on cash flow hedges

246

246

246

Remeasurement of defined benefit plans

1 632

1 632

1 632

Taxes

(558)

(558)

2013

associates and joint ventures

(506)
1 900

Fair value adjustments on available-for-sale

(558)

Share of other comprehensive income of


associates and joint ventures
Other comprehensive income for the year

87

87

(2 887)

884

(2 003)

(59)

87
(2 062)

18.9 Dividend
The dividend related to 2013 was paid on 17 April 2014 in accordance with the decision
taken at the Annual General Meeting on 10 April 2014. Shareholders approved the proposed
dividend of CHF 2.15 per share, resulting in a total dividend of CHF 6863 million.
Dividend payable is not accounted for until it has been ratified at the Annual General
Meeting. At the meeting on 16April2015, a dividend of CHF 2.20 per share will be proposed,
resulting in a total dividend of CHF7039million. For further details, refer to the Financial
Statements of Nestl S.A.
The Financial Statements for the year ended 31December2014 do not reflect this
proposed distribution, which will be treated as an appropriation of profit in the year
ending 31 December 2015.

122

Consolidated Financial Statements of the Nestl Group 2014

19. Lease commitments


19.1 Operating leases
In millions of CHF
2014

2013

Within one year

633

621

In the second year

530

499

1 044

1 042

Minimum lease payments (Future value)

In the third to the fifth year


After the fifth year

584

619

2 791

2 781

Lease commitments relate mainly to buildings, industrial equipment, vehicles and


IT equipment. The operating lease charge for the year 2014 amounts to CHF 692 million
(2013: CHF 734 million).

19.2 Finance leases


In millions of CHF
2014
Minimum lease payments

Present
value

Future
value

2013
Present
value

Future
value
49

Within one year

46

48

44

In the second year

44

50

42

49

In the third to the fifth year

91

116

101

133

After the fifth year

54

92

55

84

235

306

242

315

The difference between the future value of the minimum lease payments and their
present value represents the discount on the lease obligations.

Consolidated Financial Statements of the Nestl Group 2014

123

20. Transactions with related parties


20.1 Compensation of the Board of Directors and the Executive Board
Board of Directors
Members of the Board of Directors receive an annual compensation that varies with the
Board and the Committee responsibilities as follows:
Board members: CHF280000;
members of the Chairmans and Corporate Governance Committee: additional
CHF200000 (Chair CHF300000);
members of the Compensation Committee: additional CHF70000 (Chair CHF150000);
members of the Nomination Committee: additional CHF40000 (Chair CHF100000); and
members of the Audit Committee: additional CHF100000 (Chair CHF150000).
The Chairman and the CEO Committee fees are included in their total compensation.
Half of the compensation is paid through the granting of Nestl S.A. shares at the
ex-dividend closing price. These shares are subject to a three-year blocking period.
With the exception of the Chairman and the CEO, members of the Board of Directors
also receive an annual expense allowance of CHF15000 each. This allowance covers
travel and hotel accommodation in Switzerland, as well as sundry out-of-pocket expenses.
For Board members from outside Europe, the Company reimburses additionally their
airline tickets. When the Board meets outside of Switzerland, all expenses are borne and
paid directly by the Company.
The Chairman is entitled to a cash compensation, as well as Nestl S.A. shares which
are blocked for three years.
Executive Board
The total annual remuneration of the members of the Executive Board comprises a salary,
abonus (based on the individuals performance and the achievement of the Groups
objectives), equity compensation and other benefits. Members of the Executive Board can
choose to receive part or all of their bonus in NestlS.A. shares at the average closing
price of the last ten trading days of January of the year of the payment of the bonus.
These shares are subject to a three-year blocking period.
In millions of CHF
2014

2013

Remuneration cash

Shares

Board of Directors (a)


Chairman's compensation
Other Board members

Executive Board (a)


Remuneration cash

15

16

Bonus cash

Bonus shares

11

10

Equity compensation plans (b)


Pension
(a) For the detailed disclosures regarding the remunerations of the Board of Directors and the Executive Board that are required
by Swiss law, refer to the Compensation report of Nestl S.A. with the audited sections highlighted with a blue bar.
(b) Equity compensation plans are equity-settled share-based payment transactions whose cost is recognised over the vesting
period as required by IFRS 2.

124

Consolidated Financial Statements of the Nestl Group 2014

20. Transactions with related parties

20.2 Transactions with associates and joint ventures


There are no significant transactions between the Group companies and associates.
The main transactions with joint ventures are loans granted by the Group whose
outstanding balances as at 31 December 2014 amount to CHF247million
(2013: CHF 945 million) and dividends and interest received which represent an amount
of CHF115million (2013: CHF 139 million).
20.3 Other transactions
Nestl Capital Advisers SA (NCA), one of the Groups subsidiaries, is an unregulated
investment and actuarial adviser, based in Switzerland. Further to actuarial advice, NCA
renders investment consulting services to some of the Groups pension funds, either directly
or indirectly via the Robusta mutual fund umbrella, but NCA never executes trading and
investment transactions. The fees received by NCA in 2014 for those activities amounted
to CHF 15 million (2013: CHF15million).
Nestl Capital Management Ltd (NCM), a 100% subsidiary of NCA, is an asset manager
authorised and regulated by the Financial Conduct Authority, in the United Kingdom. NCM
manages some of the assets of the Groups pension funds. In this function, NCM executes
trading and investment transactions on behalf of these pension funds directly or for the
Robusta mutual funds pension investment vehicles. The fees received by NCM in 2014
for those activities amounted to CHF21million (2013:CHF22million). The assets under
direct management represented an amount of CHF11.4billion at 31December2014
(2013: CHF11.8billion).
In addition, Robusta Asset Management Ltd (RAML), a 100% subsidiary of NCA, is in
charge of selecting and monitoring investment managers for the Robusta mutual funds
pension investment vehicles. RAML has delegated most of its activities to third-parties,
including NCA and hence no fee income is generated by RAML. Any remaining expenses
are covered by means of fees deducted from its assets under management. The assets
under supervision of RAML amounted to CHF10.4billion at 31December2014
(2013:CHF10.0billion). Of this amount CHF 7.4 billion (2013: CHF 6.8 billion) of assets are
under direct management of NCM.
Furthermore, throughout 2014, no director of the Group had a personal interest in any
transaction of significance for the business of the Group.

21. Guarantees
At 31 December 2014, the Group has given guarantees to third parties for an amount
of CHF 603 million (2013:CHF772million). The most significant balance relates to the
Nestl UK pension fund.

22. Group risk management


The Nestl Group Enterprise Risk Management (ERM) is a process applied across the
enterprise, designed to identify potential events that may affect the Company, to manage
risk to be within its risk appetite, and to provide reasonable assurance regarding the
achievement of objectives. Risk management is an integral element of the Governance,
Risk management and Compliance (GRC) model.

Consolidated Financial Statements of the Nestl Group 2014

125

22. Group risk management

GRC is an integrated, holistic approach ensuring that the organisation acts in


accordance with its risk appetite, internal policies and guidelines, and external
regulations. GRC is thereby promoting a proactive risk management and the
effectiveness of internal controls.
ERM enables Nestls management to raise risk awareness, to anticipate risks early
and to make sound business decisions throughout the Group by understanding relative
business impact of different types of risks, root causes and correlations among
interdependent risks or major impact of the Company on its social and physical
environment.
A global financial risk appetite is defined by the Executive Board and reviewed and
validated on an annual basis by the Board of Directors.
The complexity of the Nestl Group requires a two-tiered (centralised and decentralised)
approach to the evaluation of risk. To allow for this complexity, the ERM has been
developed using both Top-Down and Bottom-Up assessments.
Implementation of this Framework has allowed the Group to achieve the following
objectives:
identification and quantification of tangible risks (financial, operational, physical, human
assets, etc.) and intangible risks (reputation, brand image, intellectual property, etc.)
in a transparent manner;
development of a common language for communicating and consolidating risk; and
prioritisation and identification of where to focus management resources and activity.
The Top-Down assessment occurs annually and focuses on the Groups global risk
portfolio. It is performed with all members of the Executive Board and addresses the most
relevant risks related to the strategic development of the Nestl Group. An annual
Compliance Risk Assessment is also performed by the functions represented in the
Group Compliance Committee. The individual assessments of Zones, Globally Managed
Businesses, and all markets are consolidated, presented and discussed with the
Executive Board. It is intended to provide a high-level mapping of Group risk and allow
Group Management to make sound decisions on the future operations of the Company.
Risk assessments are the responsibility of line management; this applies equally to a
business, a market or a function, and any mitigating actions identified in the assessments
are the responsibility of the individual line management. If a Group-level intervention is
required, responsibility for mitigating actions will generally be determined by the
Executive Board.
The Bottom-Up process includes assessments performed at an individual component
level (business unit, function, department or project). The reason for performing these
component level risk assessments is to highlight localised issues where risks can be
mitigated quickly and efficiently. The timing of these assessments varies and is linked in
the business units to the Market & Business strategy (MBS) update. Line management of
the individual component unit is responsible for the implementation of any required
mitigating actions. In 2014, a total of 42 risk assessments were performed and updated.
Overall Group ERM reporting combines the output of the Top-Down assessment
and the compilations of the individual Bottom-Up assessments. The results of the
Group ERM are presented to the Executive Board, Audit Committee and Board of Directors
annually. In the case of an individual risk assessment identifying a risk which requires
action at Group level, an ad hoc presentation is made to the Executive Board.
Financial risks management is described in more detail in Note 13.

126

Consolidated Financial Statements of the Nestl Group 2014

23. Group exposure in Venezuela


Venezuela is a hyperinflationary economy where the government has established multiple
foreign exchange rate systems, and strict exchange controls have been in place for many
years. These systems have different exchange rates and are available for a relatively limited
amount of currency.
All of the Groups foreign currency denominated transactions and balances of operations
in Venezuela are translated into the local functional currency (VEF) at the rate they are
expected to be settled, using the most appropriate official rate available.
For consolidation purposes only, the Group converts its Venezuelan operations using the
Groups best estimate of the rate which would have been applicable to capital and dividend
repatriations if they could have been made at the balance sheet date. This rate is reviewed
periodically depending on the economic and regulatory developments in the country.
The Group applies hyperinflation accounting in Venezuela. As a result, the Group
recognised during the period a re-measurement loss of CHF 606 million in the income
statement, within Other operating expenses.
As at 31 December 2014, the remaining carrying amount of cash and cash equivalent
exposed to a loss through income statement due to decline of purchasing power amounts
to CHF 51 million.
The Group will continue to monitor the situation closely in Venezuela and adjust its
accounting treatment accordingly.

24. Events after the balance sheet date


On 15 January 2015, the Swiss National Bank announced that it was removing the
ceiling on the exchange rate of 1.20 Swiss francs per Euro. This resulted in a significant
strengthening of the Swiss francs against all major currencies in which the Group operates.
The Group has assessed the impact, particularly on counterparty risk, currency
exposures, pensions and intangible assets, including goodwill. The event had no material
impact and therefore the Consolidated Financial Statements have not been adjusted for
the year ended 31 December 2014.
The Groups approach to management of foreign currency risk is described in Note 13.2c.
At 18 February 2015, the date of approval for issue of the Consolidated Financial
Statements by the Board of Directors, the Group has no other subsequent events which
either warrant a modification of the value of its assets and liabilities or any additional
disclosure.

25. Group companies


The list of companies appears in the section Companies of the Nestl Group.

Consolidated Financial Statements of the Nestl Group 2014

127

Report of the Statutory Auditor on the Consolidated Financial


Statements
to the General Meeting of Nestl S.A.
As statutory auditor, we have audited the consolidated financial statements (income
statement, statement of comprehensive income, balance sheet, cash flow statement,
statement of changes in equity and notes on pages 58 to 127) of Nestl S.A. for
the year ended 31 December 2014.
Board of Directors responsibility
The Board of Directors is responsible for the preparation of the consolidated financial
statements in accordance with International Financial Reporting Standards (IFRS) and
the requirements of Swiss law. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or
error. The Board of Directors is further responsible for selecting and applying appropriate
accounting policies and making accounting estimates that are reasonable in the
circumstances.
Auditors responsibility
Our responsibility is to express an opinion on these consolidated financial statements
based on our audit. We conducted our audit in accordance with Swiss law and Swiss
Auditing Standards as well as International Standards on Auditing. Those standards require
that we plan and perform the audit to obtain reasonable assurance whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers the internal control system relevant to the entitys
preparation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entitys internal control system. An audit also includes evaluating
the appropriateness of the accounting policies used and the reasonableness of accounting
estimates made, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2014
give a true and fair view of the financial position, the results of operations and the cash
flows in accordance with International Financial Reporting Standards (IFRS) and comply
with Swiss law.

128

Consolidated Financial Statements of the Nestl Group 2014

Report of the Statutory auditor on the Consolidated Financial Statements

Report on other legal requirements


We confirm that we meet the legal requirements on licensing according to the Auditor
Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that
there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890,
we confirm that an internal control system exists, which has been designed for the
preparation of consolidated financial statements according to the instructions of the
Board of Directors.
We recommend that the consolidated financial statements submitted to you be
approved.

KPMG SA


Scott Cormack
Licensed Audit Expert
Auditor in charge

Fabien Lussu
Licensed Audit Expert

Geneva, 18 February 2015

Consolidated Financial Statements of the Nestl Group 2014

129

Financial information 5 year review


In millions of CHF (except for data per share and employees)
2014

2013

Sales (a)

91 612

92 158

Trading operating profit (a)

14 019

14 047

as % of sales (a)

15.3%

15.2%

Sales

EBIT *

as % of sales

Results

Taxes

3 367

3 256

Profit for the year attributable to shareholders of the parent (Net profit)

14 456

10 015

as % of sales (a)

15.8%

10.9%

Total amount of dividend

7 039

Depreciation of property, plant and equipment

2 782

2 864

Current assets

33 961

30 066

Non-current assets

99 489

90 376

133 450

120 442

Current liabilities

32 895

32 917

Non-current liabilities

28 671

23 386

Equity attributable to shareholders of the parent

70 130

62 575

(f)

6 863

Balance sheet and Cash flow statement

Total assets

Non-controlling interests
Net financial debt

1 754

1 564

12 325

14 690

Ratio of net financial debt to equity (gearing)

17.6%

23.5%

Operating cash flow (b)

14 700

14 992

119.3%

102.1%

14 137

10 486

Capital expenditure

3 914

4 928

as % of sales (a)

4.3%

5.3%

as % of net financial debt


Free cash flow (c)

Data per share


Weighted average number of shares outstanding (in millions of units)

3 188

3 191

Basic earnings per share

4.54

3.14

Underlying earnings per share (d)

3.44

Dividend

2.20

(f)

2.15

48.5%

(f)

68.5%

Pay-out ratio based on Total basic earnings per share


Stock prices (high)

73.30

Stock prices (low)

63.85

Yield (e)
Market capitalisation
Number of employees (in thousands)

3.0/3.4

3.50

70.00
59.20
(f)

3.1/3.6

231 136

208 279

339

333

* Earnings Before Interest, Taxes, restructuring and impairments.


(a) 2010 restated following the changes of presentation made to the Income Statement as of 1 January 2011 (refer to Note 1 Accounting Policies of the 2011 Consolidated
Financial Statements).
(b) 2011 restated following the changes in the cash flow statement described in Note 1 Accounting policies (refer to Note 1 Accounting Policies of the 2012 Consolidated
Financial Statements).
(c) Refer to Note 17.6 for definition. As from 2012, movements with non-controlling interests are no longer deducted. 2011 comparatives have been restated accordingly.

130

Consolidated Financial Statements of the Nestl Group 2014

Financial information 5 year review

2012 (g)

2011

2010

89 721

83 642

93 015

Sales (a)

13 464

12 538

14 832

Trading operating profit (a)

15.0%

15.0%

15.9%

as % of sales (a)

109 722

Sales

16 194

EBIT *

14.8%

as % of sales

3 259

3 112

3 693

10 228

9 487

34 233

(h)

Profit for the year attributable to shareholders of the parent (Net profit)

11.4%

11.3%

36.8%

(h)

as % of sales (a)

6 552

6 213

5 939

Total amount of dividend

2 655

2 422

2 552

Depreciation of property, plant and equipment

34 020

33 324

38 997

Current assets

91 857

80 767

72 644

Non-current assets

125 877

114 091

111 641

38 597

35 232

30 146

Current liabilities

24 616

20 585

18 897

Non-current liabilities

61 007

56 797

61 867

Equity attributable to shareholders of the parent

1 657

1 477

731

18 120

14 319

3 854

29.7%

25.2%

6.2%

15 668

10 180

13 608

86.5%

71.1%

353.2%

9 905

4 757

7 761

Free cash flow (c)

5 273

4 779

4 576

Capital expenditure

5.9%

5.7%

4.9%

as % of sales (a)

3 186

3 196

3 371

3.21

2.97

10.16

(h)

Basic earnings per share

3.25

3.08

3.32

(h)

Underlying earnings per share (d)

Results

Taxes

Balance sheet and Cash flow statement

Total assets

Non-controlling interests
Net financial debt
(h)

Ratio of net financial debt to equity (gearing)


Operating cash flow (b)

(h)

as % of net financial debt

Data per share


Weighted average number of shares outstanding (in millions of units)

2.05

1.95

1.85

63.9%

65.7%

18.2%

Dividend

62.30

55.45

56.90

Stock prices (high)

52.50

43.50

48.18

Stock prices (low)

3.3/3.9

3.5/4.5

3.3/3.8

190 038

171 287

178 316

333

328

281

Pay-out ratio based on Total basic earnings per share

Yield (e)
Market capitalisation
Number of employees (in thousands)

(d) Profit per share for the year attributable to shareholders of the parent before impairments, restructuring costs, results on disposals and significant one-off items. The tax
impact from the adjusted items is also adjusted for.
(e) Calculated on the basis of the dividend for the year concerned, which is paid in the following year, and on high/low stock prices.
(f) As proposed by the Board of Directors of Nestl S.A.
(g) 2012 restated following the implementation of IFRS 11 and IAS 19 revised, and adjusted following the final valuation of the Wyeth Nutrition acquisition (refer to Note 1
Accounting Policies and Note 2 Acquisitions and disposals of businesses of the 2012 Consolidated Financial Statements).
(h) Impacted by the profit on disposal of 52% of Alcon outstanding capital.

Consolidated Financial Statements of the Nestl Group 2014

131

Companies of the Nestl Group


Principal affiliated companies
In the context of the SIX Swiss Exchange Directive on Information relating to Corporate Governance,
the disclosure criteria are as follows:
operating companies are disclosed if their sales exceed CHF 10 million or equivalent;
financial companies are disclosed if either their equity exceed CHF 10 million or equivalent and/or
the total balance sheet is higher than CHF50million or equivalent.
All companies listed below are fully consolidated except for:
1)

Joint ventures accounted for using the equity method;

2)

Joint operations accounted for in proportion to the Nestl contractual specified share (usually 50%);

3)

Associates accounted for using the equity method.

Countries within the continents are listed according to the alphabetical order of the country names.
Percentage of capital shareholding corresponds to voting powers unless stated otherwise.

Companies listed on the stock exchange.

Sub-holding, financial and property companies.


% capital

Companies

City

shareholdings Currency

Capital

Europe
Austria
C.P.A. Cereal Partners Handelsgesellschaft M.B.H. & Co. OHG

Wien

50%

EUR

145 346

Galderma Austria GmbH

Linz

100%

EUR

35 000

Nespresso sterreich GmbH & Co. OHG

Wien

100%

EUR

35 000

Nestl sterreich GmbH

Wien

100%

EUR

7 270 000

Baku

100%

USD

200 000

1)

Azerbaijan
Nestl Azerbaijan Llc
Belgium
Centre de Coordination Nestl S.A.

Bruxelles

100%

EUR

3 298 971 818

Davigel Belgilux S.A.

Bruxelles

100%

EUR

1 487 361

Nespresso Belgique S.A.

Bruxelles

100%

EUR

550 000

Nestl Belgilux S.A.

Bruxelles

100%

EUR

64 924 438

Nestl Catering Services N.V.

Bruxelles

100%

EUR

14 035 500

Nestl Waters Benelux S.A.

Etalle

100%

EUR

5 601 257

Sarajevo

100%

BAM

2 000

Sofia

100%

BGN

10 234 933

Zagreb

100%

HRK

14 685 500

Praha

50%

CZK

23 100 000

Praha

100%

CZK

300 000 000

Bosnia and Herzegovina


Nestl Adriatic BH d.o.o.
Bulgaria
Nestl Bulgaria A.D.
Croatia
Nestl Adriatic d.o.o.
Czech Republic
Cereal Partners Czech Republic
Nestl Cesko s.r.o.

132

1)

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Denmark
Glycom A/S

Copenhagen

35.7%

DKK

1 292 655

Nestl Danmark A/S

Copenhagen

100%

DKK

44 000 000

Oscar A/S

Rnnede

100%

DKK

12 000 000

Puljonki Oy

Juuka

100%

EUR

85 000

Suomen Nestl Oy

Helsinki

100%

EUR

10 000 000

Beauvais

100%

EUR

3 138 230

50%

EUR

3 000 000
7 681 250

3)

Finland

France
Centres de Recherche et Dveloppement Nestl S.A.S.
Cereal Partners France SNC

1)

Noisiel

Davigel S.A.S.

Martin Eglise

100%

EUR

Galderma International S.A.S.

Courbevoie

100%

EUR

940 020

Galderma Q-Med S.A.S.

Nanterre

100%

EUR

3 769 870

Galderma Research and Development SNC

Biot

100%

EUR

70 518 259

Herta S.A.S.

Noisiel

100%

EUR

12 908 610

Houdebine S.A.S.

Noyal Pontivy

100%

EUR

726 000

Paris

23.1%

EUR

112 246 078


14 015 454

LOral S.A.

3)

Listed on the Paris stock exchange, market capitalisation EUR 78.0 billion, quotation code (ISIN) FR0000120321
Laboratoires Galderma S.A.S.

100%

EUR

Laboratoires Innov SNC

1)

Nanterre

50%

EUR

970 000

Lactalis Nestl Produits Frais S.A.S.

3)

Laval

40%

EUR

69 208 832

Nespresso France S.A.S.

Paris

100%

EUR

1 360 000

Nestl Clinical Nutrition France S.A.S.

Noisiel

100%

EUR

57 943 072
739 559 392

Nestl Entreprises S.A.S.

Alby-sur-Chran

Noisiel

100%

EUR

Nestl France M.G. S.A.S.

Noisiel

100%

EUR

50 000

Nestl France S.A.S.

Noisiel

100%

EUR

130 925 520

Nestl Grand Froid S.A.

Noisiel

100%

EUR

3 120 000

Nestl Purina PetCare France S.A.S.

Noisiel

100%

EUR

21 091 872

Nestl Waters S.A.S.

Issy-les-Moulineaux

100%

EUR

254 893 080

Nestl Waters France S.A.S.

Issy-les-Moulineaux

100%

EUR

44 856 149

Nestl Waters Management & Technology S.A.S.

Issy-les-Moulineaux

100%

EUR

38 113

Nestl Waters Marketing & Distribution S.A.S.

Issy-les-Moulineaux

100%

EUR

26 740 940

Nestl Waters Services S.A.S.

Issy-les-Moulineaux

100%

EUR

1 356 796

Nestl Waters Supply Centre S.A.S.

Issy-les-Moulineaux

100%

EUR

2 577 000

Nestl Waters Supply Est S.A.S.

Issy-les-Moulineaux

100%

EUR

17 539 660

Nestl Waters Supply Sud S.A.S.

Issy-les-Moulineaux

100%

EUR

7 309 106
10 200 000

Socit de Bouchages Emballages


Conditionnement Moderne S.A.S.

3)

Socit des Produits Alimentaires de Caudry S.A.S.

Lavardac

50%

EUR

Noisiel

100%

EUR

1 440 000

Socit Franaise des Eaux Rgionales S.A.S.

Issy-les-Moulineaux

100%

EUR

1 490 098

Socit Immobilire de Noisiel S.A.

Noisiel

100%

EUR

22 753 550

Noisiel

100%

EUR

9 718 000

Socit Industrielle de Transformation


de Produits Agricoles S.A.S.

Consolidated Financial Statements of the Nestl Group 2014

133

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Germany
Alois Dallmayr Kaffee OHG

3)

Mnchen

25%

EUR

C.P.D. Cereal Partners Deutschland GmbH & Co. OHG

1)

Frankfurt am Main

50%

EUR

10 250 000
511 292
2 582 024

Erlenbacher Backwaren GmbH

Darmstadt

100%

EUR

Galderma Laboratorium GmbH

Dsseldorf

100%

EUR

800 000

Nestl Deutschland AG

Frankfurt am Main

100%

EUR

214 266 628

Singen

100%

EUR

52 000

Nrnberg

100%

EUR

30 000

Frankfurt am Main

100%

EUR

60 000 000

Nestl Product Technology Centre


Lebensmittelforschung GmbH
Nestl Schller Produktions GmbH
Nestl Unternehmungen Deutschland GmbH

Nestl Waters Deutschland GmbH

Mainz

100%

EUR

10 566 000

Trinks GmbH

3)

Goslar

25%

EUR

2 360 000

Trinks Sd GmbH

3)

Mnchen

25%

EUR

260 000

1)

201 070

Greece
C.P.W. Hellas Breakfast Cereals S.A.

Maroussi

50%

EUR

Nespresso Hellas S.A.

Maroussi

100%

EUR

500 000

Nestl Hellas S.A.

Maroussi

100%

EUR

39 119 726

Hungary
Cereal Partners Hungria Kft.

Budapest

50%

HUF

22 000 000

Kkkti svnyvz Zrt.

Budapest

100%

HUF

238 326 000

Nestl Hungria Kft.

Budapest

100%

HUF

6 000 000 000

Fastlog S.p.A.

Assago

100%

EUR

154 935

Galderma Italia S.p.A.

Milano

100%

EUR

612 000

Nespresso Italiana S.p.A.

Assago

100%

EUR

250 000

Nestl ltaliana S.p.A.

Assago

100%

EUR

25 582 492

Sanpellegrino S.p.A.

San Pellegrino Terme

100%

EUR

58 742 145

Almaty

100%

KZT

91 900

Vilnius

100%

LTL

110 000

Luxembourg

100%

EUR

105 200 000

Luxembourg

100%

EUR

12 525

1)

Italy

Kazakhstan
Nestl Food Kazakhstan LLP
Lithuania
UAB Nestl Baltics
Luxemburg
Compagnie Financire du Haut-Rhin S.A.

Nespresso Luxembourg Srl


Nestl Finance International Ltd

Luxembourg

100%

EUR

440 000

Nestl Treasury International S.A.

Luxembourg

100%

EUR

1 000 000

NTC-Europe S.A.

Luxembourg

100%

EUR

3 565 000

Skopje-Karpos

100%

MKD

31 065 780

Macedonia
Nestl Adriatik Makedonija d.o.o.e.l.

134

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Malta
Nestl Malta Ltd

Lija

100%

EUR

116 470

25 370 000

Netherlands
East Springs International N.V.

Amsterdam

100%

EUR

Galderma BeNeLux B.V.

Rotterdam

100%

EUR

18 002

Nespresso Nederland B.V.

Amsterdam

100%

EUR

680 670

Nestl Nederland B.V.

Amstelveen

100%

EUR

11 346 000

Oslo

100%

NOK

81 250 000

14 572 838

Norway
A/S Nestl Norge
Poland
Cereal Partners Poland Torun-Pacific Sp. Z o.o.

50%

PLN

Galderma Polska Z o.o.

Warszawa

100%

PLN

93 000

Nestl Polska S.A.

Warszawa

100%

PLN

50 000 000

Nestl Waters Polska S.A.

Warszawa

100%

PLN

196 100 000

1)

Torun

Portugal
Cereal Associados Portugal A.E.I.E.

Oeiras

50%

EUR

99 760

Nestl Portugal S.A.

Oeiras

100%

EUR

30 000 000

Prolacto-Lacticinios de So Miguel S.A.

Ponta Delgada

100%

EUR

700 000

Nestl (lreland) Ltd

Dublin

100%

EUR

41 964 052

Wyeth Nutritionals Ireland Limited

Askeaton

100%

USD

885 599 990

Beograd-Surcin

100%

RSD

10 422 773 314

Bucharest

100%

RON

132 906 800

1)

Republic of Ireland

Republic of Serbia
Nestl Adriatic S d.o.o., Beograd-Surcin
Romania
Nestl Romania S.R.L.
Russia
Cereal Partners Rus, LLC

Moscow

50%

RUB

28 730 860

LLC Nestl Watercoolers Service

Moscow

100%

RUB

20 372 926

Nestl Kuban LLC

Timashevsk

100%

RUB

11 041 793

Nestl Rossiya LLC

Moscow

100%

RUB

840 153 854

ooo Galderma LLC

Moscow

100%

RUB

25 000 000

Prievidza

100%

EUR

13 277 568

1)

Slovak Republic
Nestl Slovensko s.r.o.

Consolidated Financial Statements of the Nestl Group 2014

135

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Spain
Cereal Partners Espaa A.E.I.E.

50%

EUR

Davigel Espaa S.A.

Sant Just Desvern (Barcelona)

100%

EUR

984 000

Helados y Postres S.A.

Vitoria (Alava)

100%

EUR

103 900 300


120 000

Innov Espaa S.A.

1)

Esplugues de Llobregat (Barcelona)

120 202

Madrid

50%

EUR

Laboratorios Galderma, S.A.

Madrid

100%

EUR

432 480

Nestl Espaa S.A.

Esplugues de Llobregat (Barcelona)

100%

EUR

100 000 000

Nestl Purina PetCare Espaa S.A.

Castellbisbal (Barcelona)

100%

EUR

12 000 000

Productos del Caf S.A.

Reus (Tarragona)

100%

EUR

6 600 000

1)

Sweden
Galderma Holding AB

Uppsala

100%

SEK

50 000

Galderma Nordic AB

Uppsala

100%

SEK

31 502 698

Nestl Sverige AB

Helsingborg

100%

SEK

20 000 000

Q-Med AB

Uppsala

100%

SEK

24 845 500

1 000 000

Switzerland
Beverage Partners Worldwide (Europe) AG

Zrich

50%

CHF

CPW Operations Srl

1)

Prilly

50%

CHF

20 000

CPW S.A.

1)

Prilly

50%

CHF

10 000 000

Eckes-Granini (Suisse) S.A.

2)

Henniez

49%

CHF

2 000 000

Entreprises Maggi S.A.

Cham

100%

CHF

100 000

Galderma Pharma S.A.

Lausanne

100%

CHF

48 900 000

Galderma S.A.

Cham

100%

CHF

178 100

Galderma Schweiz AG

Egerkingen

100%

CHF

100 000

Chtel-St-Denis

100%

CHF

35 000 000

Vevey

100%

CHF

5 000 000

Cham

100%

CHF

30 000 000

Nestl Health Science S.A.

Vevey

100%

CHF

100 000

Nestl Institute of Health Sciences S.A.

Ecublens

100%

CHF

100 000

Nestl International Travel Retail S.A.

Vevey

100%

CHF

3 514 000

Nestl Nespresso S.A.

Lausanne

100%

CHF

2 000 000

Nestl Operational Services Worldwide S.A.

Bussigny-prs-Lausanne

100%

CHF

100 000

Nestl Waters (Suisse) S.A.

Henniez

100%

CHF

5 000 000

La Tour-de-Peilz

100%

CHF

6 500 000

Vevey

100%

CHF

100 000

Socit des Produits Nestl S.A.

Vevey

100%

CHF

54 750 000

Sofinol S.A.

Manno

100%

CHF

3 000 000

Spirig Phama AG

Egerkingen

100%

CHF

600 000

25 020 000

Intercona Re AG

1)

Nestec S.A.
Nestl Finance S.A.

Nestrade S.A.
Nutrition-Wellness Venture AG

Turkey
Cereal Partners Gida Ticaret Limited Sirketi

50%

TRY

Erikli Dagitim ve Pazarlama A.S.

Bursa

100%

TRY

3 849 975

Erikli Su ve Mesrubat Sanayi ve Ticaret A.S.

Bursa

100%

TRY

12 700 000

Nestl Trkiye Gida Sanayi A.S.

Istanbul

99.9%

TRY

35 000 000

Nestl Waters Gida ve Mesrubat Sanayi Ticaret A.S.

Bursa

100%

TRY

8 000 000

136

1)

Istanbul

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Ukraine
LLC Nestl Ukraine

Kyiv

100%

USD

150 000

LLC Technocom

Kharkiv

100%

UAH

119 658 066

PJSC "Lviv Confectionery Factory Svitoch

Lviv

97%

UAH

88 111 060

PRJSC Volynholding

Torchyn

100%

UAH

100 000

United Kingdom
Cereal Partners UK

50%

GBP

Galderma (UK) Ltd

Watford

100%

GBP

1 500 000

Nespresso UK Ltd

Gatwick

100%

GBP

275 000

Nestec York Ltd

Gatwick

100%

GBP

500 000

Gatwick

100%

GBP

77 940 000

Nestl Purina PetCare (UK) Ltd

Gatwick

100%

GBP

44 000 000

Nestl UK Ltd

Gatwick

100%

GBP

129 972 342

Gatwick

100%

GBP

640

Gatwick

100%

GBP

6 500 002

Liverpool

100%

GBP

625 379

Nestl Holdings (UK) PLC

1)

Nestl Waters UK Ltd


Nestl Waters (UK) Holdings Ltd
Vitaflo (International) Ltd

Consolidated Financial Statements of the Nestl Group 2014

Herts

137

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Africa
Algeria
Nestl Algrie SpA

Alger

70%

DZD

7 000 000

Nestl Waters Algrie SpA

Blida

60%

DZD

377 606 250

Luanda

100%

AOA

24 000 000

Ouagadougou

100%

XOF

50 000 000

Douala

100%

XAF

4 323 960 000

N'Djamena

100%

XAF

50 000 000

Abidjan

100%

XOF

10 000 000

Abidjan

86.5%

XOF

5 517 600 000

Kinshasa

100%

USD

33 200 000

Nestl Egypt S.A.E.

Giza

100%

EGP

80 722 000

Nestl Waters Distribution Company

Cairo

64%

EGP

15 200 000

Nestl Waters Egypt S.A.E.

Cairo

63.7%

EGP

81 500 000

90%

XAF

344 000 000

Angola
Nestl Angola Lda
Burkina Faso
Nestl Burkina Faso S.A.
Cameroon
Nestl Cameroun S.A.
Chad
Nestl Chad S.A.
Cte d'Ivoire
Centre de Recherche et de Dveloppement Nestl Abidjan S.A.
Nestl Cte dIvoire S.A.

Listed on the Abidjan stock exchange, market capitalisation XOF 60.7 billion, quotation code (ISIN) CI0009240728
Democratic Republic of the Congo
Nestl Congo S.A.R.L
Egypt

Gabon
Nestl Gabon, S.A.

Libreville

Ghana
Nestl Central and West Africa Ltd

Accra

100%

GHS

46 000

Nestl Ghana Ltd

Accra

76%

GHS

20 100 000

Conakry

99%

GNF

3 424 000 000

Nestl Equatorial African Region Limited

Nairobi

100%

KES

132 000 000

Nestl Kenya Ltd

Nairobi

100%

KES

226 100 400

Bamako

100%

XOF

10 000 000

Guinea
Nestl Guine S.A.
Kenya

Mali
Nestl Mali S.A.U.

138

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Mauritius
Nestl SEA Trading Ltd

Port Louis

100%

USD

Nestls Products (Mauritius) Ltd

Port Louis

100%

BSD

71 500

Morocco
Nestl Maghreb S.A.

Casablanca

100%

MAD

300 000

Nestl Maroc S.A.

El Jadida

94.5%

MAD

156 933 000

Maputo

100%

MZN

4 000

Niamey

99.6%

XOF

50 000 000

Ilupeju

63.5%

NGN

396 328 126

1 620 000 000

Mozambique
Nestl Mocambique Lda
Niger
Nestl Niger S.A.
Nigeria
Nestl Nigeria Plc

Listed on the Nigerian Stock Exchange, market capitalisation NGN 802.0 billion, quotation code (ISIN) NGNESTLE0006
Senegal
Nestl Sngal S.A.

Dakar

100%

XOF

Galderma Laboratories South Africa (Pty) Ltd

Bryanston

100%

ZAR

375 000

Nestl (South Africa) (Pty) Ltd

Johannesburg

100%

ZAR

553 400 000

Lome

100%

XOF

50 000 000

Nestl Tunisie Distribution S.A.

Tunis

99.5%

TND

100 000

Nestl Tunisie S.A.

Tunis

99.5%

TND

8 438 280

Lusaka

100%

ZMW

2 317 500

Harare

100%

USD

2 100 000

South Africa

Togo
Nestl Togo S.A.U.
Tunisia

Zambia
Nestl Zambia Trading Ltd
Zimbabwe
Nestl Zimbabwe (Private) Ltd

Consolidated Financial Statements of the Nestl Group 2014

139

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Americas
Argentina
Dairy Partners Americas Manufacturing Argentina S.A.

Buenos Aires

100%

ARS

73 562 144

Eco de Los Andes S.A.

Buenos Aires

50.9%

ARS

92 524 285

Galderma Argentina S.A.

Buenos Aires

100%

ARS

9 900 000

Nestl Argentina S.A.

Buenos Aires

100%

ARS

150 720 000

Bermuda
Centram Holdings Ltd

Hamilton

100%

USD

12 000

DPA Manufacturing Holdings Ltd

Hamilton

100%

USD

23 639 630

Industrias Alimentcias Fagal S.R.L.

Santa Cruz

100%

BOB

133 100 000

Nestl Bolivia S.A.

Santa Cruz

100%

BOB

191 900

161 450 000

Bolivia

Brazil
Chocolates Garoto S.A.

Vila Velha

100%

BRL

CPW Brasil Ltda

1)

Caapava

50%

BRL

7 885 520

Dairy Partners Americas Brasil Ltda

3)

So Paulo

49%

BRL

27 606 368

So Paulo

100%

BRL

39 468 974

Garanhuns

49%

BRL

100 000

So Paulo

100%

BRL

39 741 602

Dairy Partners Americas Manufacturing Brasil Ltda


Dairy Partners Americas Nordeste Produtos
Alimentcios Ltda

3)

Galderma Brasil Ltda


Innov Brasil Nutricosmticos Ltda

50%

BRL

201 160

Nestl Brasil Ltda

So Paulo

100%

BRL

452 985 643

Nestl Nordeste Alimentos e Bebidas Ltda

Feira de Santana

100%

BRL

12 713 641

Nestl Sudeste Alimentos e Bebidas Ltda

So Paulo

100%

BRL

109 317 818

Nestl Sul - Alimentos e Bebidas Ltda

Carazinho

100%

BRL

73 049 736

Nestl Waters Brasil Bebidas e Alimentos Ltda

So Paulo

100%

BRL

87 248 341

Rio de Janeiro

100%

BRL

22 798 971

G. Production Canada Inc.

Baie D'Urf (Qubec)

100%

CAD

100

Galderma Canada Inc.

New Brunswick

100%

CAD

100

Nestl Canada Inc.

Toronto (Ontario)

100%

CAD

47 165 540

Toronto (Ontario)

100%

CAD

1 010

Toronto (Ontario)

100%

CAD

106 000 100

60%

SGD

7 950 000

1)

Duque de Caxias

Q-Med Brasil Comerci e Importaa de Productos


Medicos Ltda
Canada

Nestl Capital Canada Ltd

Nestl Globe Inc.


Cayman Islands
Hsu Fu Chi International Limited

Grand Cayman

Aguas CCU Nestl Chile S.A.

3)

Santiago de Chile

49.8%

CLP

49 799 375 321

Cereales CPW Chile Ltda

1)

Santiago de Chile

50%

CLP

3 026 156 114

Comercializadora de Productos Nestl S.A.

Santiago de Chile

99.7%

CLP

1 000 000

Nestl Chile S.A.

Santiago de Chile

99.7%

CLP

11 832 926 000

Chile

140

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Colombia
Comestibles La Rosa S.A.

Bogot

100%

COP

Dairy Partners Americas Manufacturing Colombia Ltda

Bogot

100%

COP

126 397 400


200 000 000

Galderma de Colombia S.A.

Bogot

100%

COP

2 250 000 000

Nestl de Colombia S.A.

Bogot

100%

COP

1 291 305 400

Nestl Purina PetCare de Colombia S.A.

Bogot

100%

COP

17 030 000 000

Compaa Nestl Costa Rica S.A.

Barreal de Heredia

100%

CRC

18 000 000

Gerber Ingredients, S.A.

San Jos

100%

CRC

10 000

Costa Rica

Cuba
Coralac S.A.

La Habana

60%

USD

6 350 000

Los Portales S.A.

La Habana

50%

USD

24 110 000

Dominican Republic
Nestl Dominicana S.A.

Santo Domingo

97.4%

DOP

48 500 000

Silsa Dominicana S.A.

Santo Domingo

97.4%

USD

50 000

Ecuajugos S.A.

Quito

100%

USD

521 583

Industrial Surindu S.A.

Quito

100%

USD

3 000 000

Nestl Ecuador S.A.

Quito

100%

USD

1 776 760

San Salvador

100%

USD

4 457 200

Malher Export S.A.

Guatemala

100%

GTQ

5 000

Malher S.A.

Guatemala

100%

GTQ

100 000 000

Nestl Guatemala S.A.

Mixco

100%

GTQ

23 460 600

SERESA, Contratacin de Servicios Empresariales, S.A.

Guatemala

100%

GTQ

5 000

Tegucigalpa

100%

PAB

200 000

Kingston

100%

JMD

49 200 000

Ecuador

El Salvador
Nestl El Salvador, S.A. de C.V.
Guatemala

Honduras
Nestl Hondurea S.A.
Jamaica
Nestl Jamaica Ltd

Consolidated Financial Statements of the Nestl Group 2014

141

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Mexico
CPW Mxico, S. de R.L. de C.V.

Mxico, D.F.

50%

MXN

Galderma Mxico, S.A. de C.V.

Mxico, D.F.

100%

MXN

2 385 000

Manantiales La Asuncin, S.A.P.I. de C.V.

Mxico, D.F.

40%

MXN

1 035 827 492

Mxico, D.F.

100%

MXN

500 050 000

Mxico, D.F.

100%

MXN

445 826 740

Nespresso Mxico, S.A. de C.V.

Mxico, D.F.

100%

MXN

10 050 000

Nestl Mxico, S.A. de C.V.

Mxico, D.F.

100%

MXN

607 532 730

Nestl Servicios Corporativos, S.A. de C.V.

Mxico, D.F.

100%

MXN

170 100 000

Nestl Servicios Industriales, S.A. de C.V.

Mxico, D.F.

100%

MXN

1 050 000

Productos Gerber, S.A. de C.V.

Queretaro

100%

MXN

5 252 440

Ralston Purina Mxico, S.A. de C.V.

Mxico, D.F.

100%

MXN

9 257 112

Waters Partners Services Mxico, S.A.P.I. de C.V.

Mxico, D.F.

40%

MXN

620 000

1)

Marcas Nestl, S.A. de C.V.


Nescaln, S.A. de C.V.

(a)

(a)

43 138 000

Nicaragua
Compaa Centroamricana de Productos Lcteos, S.A.

Managua

92.6%

NIO

10 294 900

Nestl Nicaragua, S.A.

Managua

100%

USD

150 000

286 000

Panama
Food Products (Holdings), S.A.

Panam City

100%

PAB

Garma Enterprises, S.A.

Panam City

100%

PAB

Lacteos de Centroamrica, S.A.

Panam City

100%

USD

1 500 000

Nestl Centroamrica, S.A.

Panam City

100%

USD

1 000 000

Nestl Panam, S.A.

Panam City

100%

PAB

17 500 000

Panam City

100%

USD

750 000

Asuncin

100%

PYG

100 000 000

Unilac, Inc.

Paraguay
Nestl Paraguay S.A.
Peru
Nestl Marcas Per, S.A.C.

Lima

100%

PEN

1 000

Nestl Per, S.A.

Lima

99.6%

PEN

120 683 387

Nestl Puerto Rico, Inc.

San Juan

100%

USD

500 000

Payco Foods Corporation

Bayamon

100%

USD

890 000

Nestl Caribbean, Inc.

Valsayn

100%

USD

100 000

Nestl Trinidad and Tobago Ltd

Valsayn

100%

TTD

35 540 000

Puerto Rico

Trinidad and Tobago

(a) Voting

142

powers amount to 51%

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

United States
Beverage Partners Worldwide (North America)

1)

Brand Direct Health, LLC

Wilmington (Delaware)

50%

USD

Wilmington (Delaware)

100%

USD

1 001

Checkerboard Holding Company, Inc.

Wilmington (Delaware)

100%

USD

Dreyers Grand Ice Cream Holdings, Inc.

Wilmington (Delaware)

100%

USD

10

Fort Worth (Texas)

100%

USD

981

Galderma Laboratories, Inc.


Gerber Life Insurance Company

New York

100%

USD

148 500 000

Gerber Products Company

Fremont (Michigan)

100%

USD

1 000

Malher, Inc.

Stafford (Texas)

100%

USD

1 000

Nespresso USA, Inc.

Wilmington (Delaware)

100%

USD

1 000

Wilmington (Delaware)

100%

USD

1 000 000

Nestl Dreyer's Ice Cream Company

Wilmington (Delaware)

100%

USD

Nestl HealthCare Nutrition, Inc.

Wilmington (Delaware)

100%

USD

50 000
1

Nestl Capital Corporation

Nestl Health Science-Pamlab, Inc.

Wilmington (Delaware)

100%

USD

Nestl Health Science US Holdings, Inc.

Wilmington (Delaware)

100%

USD

Nestl Holdings, Inc.

Wilmington (Delaware)

100%

USD

100 000

Nestl Insurance Holdings, Inc.

Wilmington (Delaware)

100%

USD

10

Nestl Nutrition R&D Centers, Inc.

Wilmington (Delaware)

100%

USD

10 000

Nestl Prepared Foods Company

Philadelphia (Pennsylvania)

100%

USD

476 760

Nestl Purina PetCare Company

St. Louis (Missouri)

100%

USD

1 000

Nestl Purina PetCare Global Resources, Inc.

Wilmington (Delaware)

100%

USD

1 000

Nestl R&D Center, Inc.

Wilmington (Delaware)

100%

USD

10 000

Nestl Transportation Company

Wilmington (Delaware)

100%

USD

100

Nestl USA, Inc.

Wilmington (Delaware)

100%

USD

1 000

Wilmington (Delaware)

100%

USD

10 000 000

Wilmington (Delaware)

100%

USD

10 700 000

Wilmington (Delaware)

100%

USD

Los Angeles (California)

100%

USD

100

Nestl Waters North America Holdings, Inc.

Nestl Waters North America, Inc.


NiMCo US, Inc.

Prometheus Laboratories Inc.


Red Maple Insurance Company

Williston (Vermont)

100%

USD

1 200 000

Austin (Texas)

100%

USD

10

Cleveland (Ohio)

100%

USD

Cincinnati (Ohio)

100%

USD

Wilmington (Delaware)

100%

USD

100 000

Vitality Foodservice, Inc.

Dover (Delaware)

100%

USD

1 240

Waggin' Train LLC

Wilmington (Delaware)

100%

USD

Zuke's LLC

Wilmington (Delaware)

100%

USD

Montevideo

100%

UYU

9 495 189

Laboratorios Galderma Venezuela, S.A.

Caracas

100%

VEF

5 000

Nestl Cadipro, S.A.

Caracas

100%

VEF

50 633 501

Nestl Venezuela, S.A.

Caracas

100%

VEF

516 590

Sweet Leaf Tea Company


The Stouffer Corporation

Tradewinds Beverage Company


TSC Holdings, Inc.

Uruguay
Nestl del Uruguay S.A.
Venezuela

Consolidated Financial Statements of the Nestl Group 2014

143

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Asia
Bahrain
Nestl Bahrain Trading WLL

Manama

49%

BHD

200 000

100%

BDT

100 000 000

Bangladesh
Nestl Bangladesh Limited

Dhaka

Greater China Region


Anhui Yinlu Foods Co., Ltd.

Chuzhou

60%

CNY

303 990 000

Beverage Partners Worldwide (Pacific) Limited

Hong Kong

50%

HKD

352 000 000

Chengdu Hsu Chi Foods Co., Limited

Chengdu

60%

CNY

40 000 000

Tianjin

50%

CNY

305 000 000

Dongguan Andegu Plastic Packaging Material Limited

Dongguan

60%

HKD

10 000 000

Dongguan Hsu Chi Food Co., Limited

Dongguan

60%

HKD

700 000 000

Galderma Hong Kong Limited

Hong Kong

100%

HKD

10 000

Galderma Trading (Shanghai) Co. Ltd

Shanghai

100%

EUR

400 000

Guangzhou Refrigerated Foods Limited

Guangzhou

95.5%

CNY

390 000 000

Henan Hsu Fu Chi Foods Co., Limited

Zhumadian

60%

CNY

210 000 000

Wanchai

60%

USD

100 000

Hubei Yinlu Foods Co., Limited

Hanchuan

60%

CNY

353 000 000

Nestl (China) Limited

Beijing

100%

CNY

250 000 000

Nestl Dongguan Limited

Dongguan

100%

CNY

536 000 000

Nestl Hong Kong Limited

Hong Kong

100%

HKD

250 000 000

Nestl Hulunbeir Limited

Hulunbeir

100%

CNY

158 000 000

Nestl Nespresso Beijing Limited

Beijing

100%

CNY

7 000 000

Nestl Purina PetCare Tianjin Limited

Tianjin

100%

CNY

40 000 000

Nestl Qingdao Limited

Laixi

100%

CNY

930 000 000

Nestl R&D (China) Limited

Beijing

100%

CNY

40 000 000

Nestl Shanghai Limited

Shanghai

95%

CNY

200 000 000

Nestl Shuangcheng Limited

Shuangcheng

Nestl Sources Shanghai Limited

Shanghai

Nestl Sources Tianjin Limited

CPW Tianjin Limited

Hsu Fu Chi International Holdings Limited

1)

97%

CNY

435 000 000

100%

CNY

211 000 000

Tianjin

95%

CNY

204 000 000

Nestl Taiwan Limited

Taipei

100%

TWD

100 000 000

Nestl Tianjin Limited

Tianjin

100%

CNY

785 000 000

Q-Med International Trading (Shanghai) Limited

Shanghai

100%

USD

600 000

Shandong Yinlu Foods Co. Limited

Jinan

60%

CNY

146 880 000

Shanghai Nestl Product Services Limited

Shanghai

100%

CNY

83 000 000

Shanghai Totole First Food Limited

Shanghai

80%

CNY

72 000 000

Shanghai Totole Food Limited

Shanghai

80%

USD

7 800 000

Sichuan Haoji Food Co. Limited

Puge

80%

CNY

80 000 000
40 000 000

Suzhou Hexing Food Co., Ltd

80%

CNY

Hong Kong

100%

HKD

100 010

Wyeth (Shanghai) Trading Company Limited (China)

Shanghai

100%

USD

1 000 000

Wyeth Nutritional (China) Co., Limited

Suzhou

100%

CNY

900 000 000

Xiamen Yinlu Foods Group Co., Limited

Xiamen

60%

CNY

496 590 000

Yunnan Dashan Drinks Co., Limited

Kunming

100%

CNY

35 000 000

Wyeth (Hong Kong) Holding Company Limited

144

Suzhou

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

India
Galderma India Private Ltd

Mumbai

100%

INR

24 156 000

Nestl R&D Centre India Private Ltd

New Delhi

100%

INR

2 101 380 000

New Delhi

62.8%

INR

964 157 160

Nestl India Ltd

Listed on the Mumbai stock exchange, market capitalisation INR 616.0 billion, quotation code (ISIN) INE239A01016
Indonesia
P.T. Nestl Indofood Citarasa Indonesia

Jakarta

50%

IDR

200 000 000 000

P.T. Nestl Indonesia

Jakarta

90.2%

IDR

152 753 440 000

P.T. Wyeth Nutrition Indonesia

Jakarta

90%

IDR

2 000 000 000

1)

Iran
Anahita Polour Industrial Mineral Water Company

Tehran

100%

IRR

35 300 000 000

Nestl Iran (Private Joint Stock Company)

Tehran

89.7%

IRR

358 538 000 000

Tel-Aviv

100%

ILS

1 000

Shoam

63.7%

ILS

110 644 444

Israel
Nespresso Israel Ltd
OSEM Investments Ltd

Listed on the Tel-Aviv stock exchange, market capitalisation ILS 7.7 billion, quotation code (ISIN) IL0003040149
Japan
Galderma K.K.

Tokyo

100%

JPY

10 000 000

Nestl Japan Ltd

Kobe

100%

JPY

10 000 000 000

Nestl Nespresso K.K.

Kobe

100%

JPY

10 000 000

Jordan
Ghadeer Mineral Water Co. WLL

Amman

75%

JOD

1 785 000

Nestl Jordan Trading Company Ltd

Amman

77.8%

JOD

410 000

49%

KWD

300 000

1 610 000 000

Kuwait
Nestl Kuwait General Trading Company WLL

Safat

Lebanon
Socit des Eaux Minrales Libanaises S.A.L.

Hazmieh

100%

LBP

Socit pour lExportation des Produits Nestl S.A.

Baabda

100%

CHF

1 750 000

SOHAT Distribution S.A.L.

Hazmieh

100%

LBP

160 000 000

Malaysia
Cereal Partners (Malaysia) Sdn. Bhd.
Nestl (Malaysia) Bhd.

1)

Petaling Jaya

50%

MYR

2 500 000

Petaling Jaya

72.6%

MYR

234 500 000

Listed on the Kuala Lumpur stock exchange, market capitalisation MYR 16.1 billion, quotation code (ISIN) MYL4707OO005
Nestl Asean (Malaysia) Sdn. Bhd.

Petaling Jaya

72.6%

MYR

42 000 000

Nestl Manufacturing (Malaysia) Sdn. Bhd.

Petaling Jaya

72.6%

MYR

132 500 000

Nestl Products Sdn. Bhd.

Petaling Jaya

72.6%

MYR

25 000 000

Purina PetCare (Malaysia) Sdn. Bhd.

Petaling Jaya

100%

MYR

1 100 000

Wyeth Nutrition (Malaysia) Sdn. Bhd.

Petaling Jaya

100%

MYR

61 969 505

Consolidated Financial Statements of the Nestl Group 2014

145

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Oman
Nestl Oman Trading LLC

Muscat

49%

OMR

300 000

Lahore

59%

PKR

453 495 840

Pakistan
Nestl Pakistan Ltd

Listed on the Karachi and the Lahore stock exchanges, market capitalisation PKR 412.7 billion, quotation code (ISIN) PK0025101012
Palestinian Territories
Nestl Trading Private Limited Company

Bethlehem

97.5%

JOD

200 000

Philippines
CPW Philippines, Inc.

50%

PHP

7 500 000

Galderma Philippines, Inc.

Manila

100%

PHP

12 500 000

Nestl Business Services AOA, Inc.

Bulacan

100%

PHP

70 000 000

Nestl Philippines, Inc.

Cabuyao

100%

PHP

2 300 927 400

88.5%

PHP

630 000 000

100%

PHP

610 418 100

Penpro, Inc.

1)

Wyeth Philippines, Inc.

Makati City

Makati City
Manila

(b)

Qatar
Al Manhal Water Factory Co. Ltd WLL

Doha

51%

QAR

5 500 000

Nestl Qatar Trading LLC

Doha

49%

QAR

1 680 000

Seoul

100%

KRW

500 000 000

Seoul

50%

KRW

52 783 120 000

Nestl Korea Yuhan Chaegim Hoesa

Seoul

100%

KRW

10 100 000 000

Pulmuone Waters Co., Ltd

Gyeonggi-Do

51%

KRW

6 778 760 000

Al Anhar Water Factory Co. Ltd

Jeddah

64%

SAR

7 500 000

Al Manhal Water Factory Co. Ltd

Riyadh

64%

SAR

7 000 000

Nestl Saudi Arabia LLC

Jeddah

75%

SAR

27 000 000

Nestl Water Factory Co. Ltd

Riyadh

64%

SAR

15 000 000

Pure Water Factory Co. Ltd

Madinah

64%

SAR

5 000 000

Jeddah

51%

SAR

51 000 000

SHAS Company for Water Services Ltd

Riyadh

64%

SAR

13 500 000

Springs Water Factory Co. Ltd

Dammam

64%

SAR

5 000 000

Galderma Singapore Private Ltd

Singapore

100%

SGD

1 387 000

Nestl R&D Center (Pte) Ltd

Singapore

100%

SGD

20 000 000

Singapore

100%

SGD

1 000 000

Singapore

100%

JPY

10 000 000 000

Singapore

100%

Republic of Korea
Galderma Korea Ltd
LOTTE-Nestl (Korea) Co., Ltd

1)

Saudi Arabia

Saudi Food Industries Co. Ltd

3)

Singapore

Nestl Singapore (Pte) Ltd


Nestl TC Asia Pacific Pte Ltd
Wyeth Nutritionals (Singapore) Pte Ltd

(b) Voting

146

SGD

SGD

2 159 971 715

powers amount to 40%

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Sri Lanka
Nestl Lanka PLC

Colombo

90.8%

LKR

537 254 630

100%

SYP

800 000 000

Listed on the Colombo stock exchange, market capitalisation LKR 113.1 billion, quotation code (ISIN) LK0128N00005
Syria
Nestl Syria S.A.

Damascus

Thailand
Galderma (Thailand) Ltd

Bangkok

100%

THB

100 000 000

Nestl (Thai) Ltd

Bangkok

100%

THB

880 000 000

Perrier Vittel (Thailand) Ltd

Bangkok

100%

THB

235 000 000

Quality Coffee Products Ltd

Bangkok

50%

THB

500 000 000

600 000

United Arab Emirates


CP Middle East FZCO

Dubai

50%

AED

Nestl Dubai Manufacturing LLC

Dubai

49%

AED

300 000

Nestl Middle East FZE

Dubai

100%

AED

3 000 000
2 997 343 684

Nestl Treasury Centre-Middle East & Africa Ltd

1)

Dubai

100%

USD

Nestl UAE LLC

Dubai

49%

AED

2 000 000

Nestl Waters Factory H&O LLC

Dubai

48%

AED

22 300 000

99.8%

USD

38 715 463

Uzbekistan
Uzbek-Swiss JV Nestl Uzbekistan LLC

Namangan

Vietnam
La Vie Limited Liability Company

Long An

65%

USD

2 663 400

Nestl Vietnam Ltd

Bien Hoa

100%

USD

155 266 000

Consolidated Financial Statements of the Nestl Group 2014

147

Companies of the Nestl Group

% capital
Companies

City

shareholdings Currency

Capital

Oceania
Australia
Cereal Partners Australia Pty Ltd

Sydney

50%

AUD

Galderma Australia Pty Ltd

Belrose

100%

AUD

2 500 300

Nestl Australia Ltd

Sydney

100%

AUD

274 000 000

Lami

100%

FJD

3 000 000

Papeete

100%

XPF

5 000 000

Nouma

100%

XPF

250 000 000

Auckland

50%

NZD

Auckland

100%

NZD

300 000

Lae

100%

PGK

11 850 000

1)

107 800 000

Fiji
Nestl (Fiji) Ltd
French Polynesia
Nestl Polynsie S.A.S.
New Caledonia
Nestl Nouvelle-Caldonie S.A.S.
New Zealand
CPW New Zealand
Nestl New Zealand Limited

1)

Papua New Guinea


Nestl (PNG) Ltd

148

Consolidated Financial Statements of the Nestl Group 2014

Companies of the Nestl Group

Technical assistance, research and development units


Technical Assistance
Research centres
Research & Development centres
Product Technology centres

TA
R
R&D
PTC

City of operations
Switzerland
Nestec S.A.

Vevey

TA

Technical, scientific, commercial and business assistance company whose units, specialised in all areas
of the business, supply permanent know-how and assistance to operating companies in the Group within
the framework of licence and equivalent contracts. It is also responsible for all scientific research and
technological development, which it undertakes itself or through affiliated companies.
The units involved are:
Clinical Development Unit

Lausanne

Orbe

R&D

Nestl Institute of Health Sciences

Ecublens

Nestl Product Technology Centre

Konolfingen

PTC

Nestl Product Technology Centre

Orbe

PTC

Nestl R&D Centre

Broc

R&D

Nestl R&D Centre

Orbe

R&D

Nestl Research Centre

Lausanne

Nestl System Technology Centre

Orbe

PTC

Rutherglen

R&D

Santiago de Chile

R&D

Abidjan

R&D

Galderma R&D Centre

Biot

R&D

Nestl Product Technology Centre

Beauvais

PTC

Nestl Product Technology Centre

Lisieux

PTC

Nestl Product Technology Centre

Vittel

PTC

Nestl R&D Centre

Aubigny

R&D

Nestl R&D Centre

Tours

R&D

Singen

PTC

CPW R&D Centre

1)

Australia
CPW R&D Centre

1)

Chile
Nestl R&D Centre
Cte d'Ivoire
Nestl R&D Centre
France

Germany
Nestl Product Technology Centre

Consolidated Financial Statements of the Nestl Group 2014

149

Companies of the Nestl Group

City of operations
Greater China Region
Nestl R&D Centre

Beijing

R&D

Nestl R&D Centre

Shanghai

R&D

Gurgaon

R&D

Sderot

R&D

Sansepolcro

R&D

Queretaro

R&D

Askeaton

R&D

Singapore

R&D

Uppsala

R&D

York

PTC

Galderma R&D Centre

Cranbury (New Jersey)

R&D

Nestl Product Technology Centre

Fremont (Michigan)

PTC

Nestl Product Technology Centre

Marysville (Ohio)

PTC

Nestl Product Technology Centre

St. Louis (Missouri)

PTC

Nestl R&D Centre

Bakersfield (California)

R&D

Nestl R&D Centre

Minneapolis (Minnesota)

R&D

Nestl R&D Centre

San Diego (California)

R&D

Nestl R&D Centre

Solon (Ohio)

R&D

Nestl R&D Centre

St. Joseph (Missouri)

R&D

Nestl R&D Centre

King of Prussia (Pennsylvania)

R&D

India
Nestl R&D Centre
Israel
Nestl R&D Centre
Italy
Nestl R&D Centre
Mexico
Nestl R&D Centre
Republic of Ireland
Nestl R&D Centre
Singapore
Nestl R&D Centre
Sweden
Galderma R&D Centre
United Kingdom
Nestl Product Technology Centre
United States

150

Consolidated Financial Statements of the Nestl Group 2014

148th Financial Statements


of Nestl S.A.

153

Income statement for the year ended 31 December 2014

154

Balance sheet as at 31 December 2014

155

163

Notes to the annual accounts


1. Accounting policies
2. Income from Group companies
 3. Financial income
4. Profit on disposal of assets
5. Investment write-downs
6. Administration and other expenses
7. Financial expense
8. Taxes
9. Liquid assets
10. Receivables
11. Financial assets
12. Participations in Group companies
13. Loans to Group companies
14. Own shares
15. Intangible assets
16. Tangible fixed assets
17. Short-term payables
18. Long-term payables
19. Provisions
20. Share capital
21. Changes in equity
22. Reserve for own shares
23. Contingencies
24. Risk assessment
25. Additional information

165

Proposed appropriation of profit

166

Report of the Statutory Auditor

155
157

158

159

160

161
162

152

148th Financial Statements of Nestl S.A.

Income statement
for the year ended 31 December 2014

In millions of CHF
Notes

2014

2013

Income from Group companies

6 616

8 089

Financial income

305

208

Profit on disposal of assets

7 449

1 247

Income

Other income

100

128

Total income

14 470

9 672

Expenses
Investment write-downs

(2 200)

(1 376)

Administration and other expenses

(260)

(249)

Financial expense

(53)

(52)

(2 513)

(1 677)

Total expenses before taxes


Profit before taxes
Taxes
Profit for the year

148th Financial Statements of Nestl S.A.

11 957
8
21

(457)
11 500

7 995
(537)
7 458

153

Balance sheet
as at 31 December 2014
before appropriations
In millions of CHF
Notes

2014

2013

2 221

2 709

10

1 007

1 026

Assets
Current assets
Liquid assets
Receivables
Prepayments and accrued income
Total current assets

11

3 239

3 742

Non-current assets
Financial assets

11

47 867

41 620

Intangible assets

15

367

Tangible fixed assets

16

Total non-current assets

47 868

41 987

Total assets

51 107

45 729

4 199

4 045

Liabilities and equity


Liabilities
Short-term payables

17

Accruals and deferred income


Long-term payables

18

Provisions

19

Total liabilities

11

162

154

1 335

751

5 702

4 961

Equity
20/21

322

322

Legal reserves

Share capital

21

5 364

3 818

Special reserve

21

27 683

29 165

Profit brought forward

21

536

Profit for the year

21

11 500

7 458

Total equity

45 405

40 768

Total liabilities and equity

51 107

45 729

154

148th Financial Statements of Nestl S.A.

Notes to the annual accounts

1. Accounting policies
General
Nestl S.A. (the Company) is the ultimate holding company
of the Nestl Group which comprises subsidiaries, associated
companies and joint ventures throughout the world. The
accounts are prepared in accordance with accounting
principles required by Swiss law. They are prepared under
the historical cost convention and on an accrual basis.
Foreign currency translation
Transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction or, if hedged forward,
at the rate of exchange under the related forward contract.
Non-monetary assets and liabilities are carried at historical
rates. Monetary assets and liabilities in foreign currencies
are translated at year-end rates. Any resulting exchange
differences are included in the respective income statement
captions depending upon the nature of the underlying
transactions. The aggregate unrealised exchange difference
is calculated by reference to original transaction date
exchange rates and includes hedging transactions. Where
this gives rise to a net loss, it is charged to the income
statement whilst a net gain is deferred.
Hedging
The Company uses forward foreign exchange contracts,
options, financial futures and currency swaps to hedge
foreign currency flows and positions. Unrealised foreign
exchange differences on hedging instruments are matched
and accounted for with those on the underlying asset or
liability. Long-term loans, in foreign currencies, used to
finance investments in participations are generally not
hedged.
The Company also uses interest rate swaps to manage
interest rate risk. The swaps are accounted for at fair value
at each balance sheet date and changes in the market value
are recorded in the income statement.

148th Financial Statements of Nestl S.A.

Income statement
Not currently transferable income is recognised only upon
receipt.
In accordance with Swiss law and the Companys
Articles of Association, dividends are treated as an
appropriation of profit in the year in which they are ratified
at the Annual General Meeting rather than as an
appropriation of profit in the year to which they relate.
Taxes
This caption includes taxes on profit, capital and
withholding taxes on transfers from Group companies.
Financial assets
The carrying value of participations and loans comprises the
cost of investment, excluding the incidental costs of
acquisition, less any write-downs.
Participations located in countries where the political,
economic or monetary situation might be considered to
carry a greater than normal level of risk are carried at
a nominal value of one franc.
Participations and loans are written down on
a conservative basis, taking into account the profitability of
the company concerned.
Marketable securities are valued at the lower of cost and
market value.
Own shares held to cover option rights in favour of
members of the Groups Management are carried at
exercise price if lower than cost. Own shares held for
trading purposes are carried at the lower of cost and market
value as are own shares earmarked to cover other LongTerm Incentive Plans. Own shares repurchased for the
Share Buy-Back Programme are carried at the lower of cost
and market value. All gains and losses on own shares are
recorded in the income statement.

155

1. Accounting policies

Intangible assets
Trademarks and other industrial property rights are written
off on acquisition or exceptionally over a longer period, not
exceeding their useful lives.
Tangible fixed assets
The Company owns land and buildings which have been
depreciated in the past. Office furniture and equipment are
fully depreciated on acquisition.

Accruals and deferred income


Accruals and deferred income comprise expenses relating
to the current year which will not be paid until after the
balance sheet date and income received in advance,
relating to the following year. The negative fair values of
forward exchange contracts and interest rate swaps are also
included in this caption.

Provisions
Provisions include present obligations as well as
contingencies. A provision for uninsured risks is constituted
to cover general risks not insured with third parties, such as
consequential loss. Provisions for Swiss taxes are made on
the basis of the Companys taxable capital, reserves and
profit for the year. A general provision is maintained to cover
possible foreign tax liabilities.
Employee benefits
In Switzerland, Nestls pension plan is a cash balance plan
where contributions are expressed as a percentage of the
pensionable salary. The pension plan guarantees the
amount accrued on the members savings accounts, as well
as a minimum interest on those savings accounts. At
retirement date, the savings accounts are converted into
pensions. However, members may opt to receive a part of
the pension as a lump sum. Increases of pensions in
payment are granted on a discretionary basis by the Board
of Trustees, subject to the financial situation of the plan. To
be noted that there is also a defined benefit plan that has
been closed to new entrants in 2013 and whose members
below age 55 have been transferred to the cash balance
plan. This heritage plan is a hybrid between a cash balance
plan and a plan based on a final pensionable salary.
Prepayments and accrued income
Prepayments and accrued income are comprised of
payments made in advance relating to the following year,
and income relating to the current year which will not be
received until after the balance sheet date (such as interest
receivable on loans or deposits). The fair values of forward
exchange contracts and interest rate swaps are also
included in this caption.

156

148th Financial Statements of Nestl S.A.

2. Income from Group companies


This represents dividends of the current and prior years and other net income from
Group companies.

3. Financial income
In millions of CHF
2014

2013

Net result on loans to Group companies

197

113

Other financial income

108

95

305

208

2014

2013

1 700

939

4. Profit on disposal of assets


This represents mainly the net gains realised on the sale of financial assets, trademarks
and other industrial property rights previously written down. In 2014, the net gain of
CHF7181 million on the sale of LOral shares is included.

5. Investment write-downs
In millions of CHF
Participations and loans
Trademarks and other industrial property rights

500

437

2 200

1 376

6. Administration and other expenses


In millions of CHF
2014

2013

Salaries and welfare expenses

106

114

Other expenses

154

135

260

249

2014

2013

52

52

7. Financial expense
In millions of CHF
Net result on loans from Group companies
Other financial expenses

148th Financial Statements of Nestl S.A.

53

52

157

8. Taxes
This includes withholding taxes on income from foreign sources, as well as Swiss taxes
for which adequate provisions have been established.

9. Liquid assets
In millions of CHF
Cash and cash equivalents
Marketable securities

2014

2013

2 221

2 709

2 221

2 709

2014

2013

955

963

Cash and cash equivalents include deposits with maturities of less than three months.
Marketable securities consist of commercial paper with maturities from three to six
months.

10. Receivables
In millions of CHF
Amounts owed by Group companies (current accounts)
Other receivables

52

63

1 007

1 026

11. Financial assets


In millions of CHF
Notes

2014

2013

Participations in Group companies

12

31 390

30 297

Loans to Group companies

13

13 947

10 391

Own shares

14

2 487

932

Other investments

43

47 867

41 620

12. Participations in Group companies


In millions of CHF
At 1 January
Net increase/(decrease)
Write-downs
At 31 December

158

2014

2013

30 297

28 617

1 643

1 971

(550)
31 390

(291)
30 297

148th Financial Statements of Nestl S.A.

12. Participations in Group companies

The carrying value of participations continues to represent a conservative valuation


having regard to both the income received by the Company and the net assets of the
Group companies concerned.
A list of the most important companies held, either directly by Nestl S.A. or indirectly
through other Group companies, with the percentage of the capital controlled is given in
the Consolidated Financial Statements of the Nestl Group.

13. Loans to Group companies


In millions of CHF
At 1 January

2014

2013

10 391

11 574

New loans

5 932

1 638

Repayments and write-downs

(2 996)

(2 625)

Realised exchange differences


Unrealised exchange differences
At 31 December

12

(70)

608

(126)

13 947

10 391

Number

Amount

Loans granted to Group companies are usually long-term to finance investments in


participations.

14. Own shares


In millions of CHF
2014
Number
Share Buy-Back Programme

Amount

2013

23 742 030

1 645

Management Stock Option Plan

4 838 725

247

6 768 355

335

Restricted Stock Unit Plan

5 098 060

311

8 259 480

481

Performance Share Unit Plan

3 016 551

184

403 945

23

Future Long-Term Incentive Plans

1 642 952

100

1 603 644

93

38 338 318

2 487

17 035 424

932

During the year 23 742 030 shares were purchased as part of the Share Buy-Back
Programme for CHF1645 million.
The Company held 4 838 725 shares to cover management option rights and 9 757 563
shares to cover the other incentive plans. The Management Stock Option Plan is valued
at strike price if lower than acquisition cost, while the shares held for the other plans are
valued at acquisition cost. During the year 5 241 243 shares were delivered as part of the
Nestl Group remuneration plans for a total value of CHF 280 million.

15. Intangible assets


In 2013 this amount represents the balance of the trademarks and other industrial
property rights capitalised in relation with the acquisition of Kraft Foods frozen pizza
business.

148th Financial Statements of Nestl S.A.

159

16. Tangible fixed assets


These are principally the land and buildings at Cham. The En Bergre head office
building in Vevey is held by a service company, which is wholly owned by Nestl S.A.
The fire insurance value of buildings, furniture and office equipment at 31 December
2014 amounted to CHF9.5 million (2013: CHF 9.5 million).

17. Short-term payables


In millions of CHF
Amounts owed to Group companies

2014

2013

4 010

3 992

Other payables

189

53

4 199

4 045

18. Long-term payables


Amounts owed to Group companies represent a long-term loan issued in 1989.

19. Provisions
In millions of CHF
2014

2013

Uninsured
risks

Exchange
risks

Swiss and
foreign
taxes

Other

Total

Total

475

169

107

751

711

Provisions made in the period

550

163

56

769

188

Amounts used

(79)

(37)

(116)

(128)

At 1 January

Unused amounts reversed


At 31 December

(64)

(5)

475

550

189

121

(69)
1 335

(20)
751

20. Share capital


In millions of CHF
Number of registered shares of nominal value CHF 0.10 each
In millions of CHF

2014

2013

3 224 800 000

3 224 800 000

322

322

According to article 5 of the Companys Articles of Association, no person or entity shall


be registered with voting rights for more than 5% of the share capital as recorded in the
commercial register. This limitation on registration also applies to persons who hold
some or all of their shares through nominees pursuant to this article. In addition, article 11
provides that no person may exercise, directly or indirectly, voting rights, with respect to
own shares or shares represented by proxy, in excess of 5% of the share capital as
recorded in the commercial register.
At 31 December 2014, the share register showed 151 489 registered shareholders. If
unprocessed applications for registration, the indirect holders of shares under American
Depositary Receipts and the beneficial owners of shareholders registered as nominees
160

148th Financial Statements of Nestl S.A.

20. Share capital

are also taken into account, the total number of shareholders probably exceeds 250 000.
The Company was not aware of any shareholder holding, directly or indirectly, 5% or
more of the share capital. Group companies were holding together 1.7% of the Nestl S.A.
share capital as at 31 December 2014.
Conditional share capital
According to the Articles of Association, the share capital may be increased in an amount
not to exceed CHF10000000 (ten million Swiss francs) by issuing up to 100 000 000
registered shares with a nominal value of CHF0.10 each, which shall be fully paid up,
through the exercise of conversion rights and/or option rights granted in connection with
the issuance by Nestl S.A. or one of its subsidiaries of newly or already issued convertible
debentures, debentures with option rights or other financial market instruments.
Concerning the share capital in general, refer also to the Corporate Governance Report.

21. Changes in equity


In millions of CHF

Share
capital

General
reserve (a)

Reserve
for own
shares (a)(b)

Special
reserve

Retained
earnings

322

1 913

1 905

29 165

7 463

40 768

Profit for the year

11 500

11 500

Dividend for 2013

(6 863)

Movement of own shares

1 546

(1 546)

Dividend on own shares held on the payment date of 2013 dividend

64

(64)

322

1 913

3 451

27 683

12 036

45 405

At 1 January 2014

At 31 December 2014

Total

(6 863)

(a) The general reserve and the reserve for own shares constitute the legal reserves.
(b) Refer to Note 22.

22. Reserve for own shares


At 31 December2013, the reserve for own shares amounting to CHF1905million
represented the cost of 17035424 shares earmarked to cover the Nestl Group
remuneration plans and 18188445 shares held for trading purposes.
During the year, an additional 23 742 030 shares have been acquired at a cost of
CHF1645million under the Share Buy-Back Programme. A total of 5241243 shares
have been delivered to the beneficiaries of the Nestl Group remuneration plans. In
addition, 2802107 shares have been acquired at a cost of CHF 190 million, to cover
Nestl Group remuneration plans. 150000 shares have been sold for a total amount
of CHF 10 million.
Another Group company holds 18038445 Nestl S.A. shares. The total of own shares
of 56376763 held by Group companies at 31December2014 represents 1.7% of the
Nestl S.A. share capital (35223869 own shares held at 31December2013, representing
1.1% of the Nestl S.A. share capital).

148th Financial Statements of Nestl S.A.

161

23. Contingencies
At 31 December 2014, the total of the guarantees mainly for credit facilities granted to Group
companies and commercial paper programmes, together with the buy-back agreements
relating to notes issued, amounted to CHF19177million (2013: CHF20272million).

24. Risk assessment


Nestl Management considers that the risks for NestlS.A. are the same as the ones
identified at Group level, as the holding is an ultimate aggregation of all the entities of the
Group.
Therefore, we refer to the Nestl Group Enterprise Risk Management Framework (ERM)
described in Note 22 of the Consolidated Financial Statements.

162

148th Financial Statements of Nestl S.A.

25. Additional information requested by the Swiss Code


of Obligations on remuneration
Shares and stock options ownership of the non-executive members of the
Board of Directors and closely related parties as at 31 December 2014

Number of
shares held (a)
Peter Brabeck-Letmathe, Chairman

Number of
options held (b)

3 059 108

1 137 600

Andreas Koopmann, 1st Vice Chairman

88 144

Rolf Hnggi, 2nd Vice Chairman

87 627

Beat Hess

28 508

Daniel Borel

234 363

Steven G. Hoch

199 153

Nana Lal Kidwai

21 687

Titia de Lange

12 165

Jean-Pierre Roth

12 352

Ann M. Veneman

10 396

Henri de Castries

9 161

Eva Cheng

4 974

3 767 638

1 137 600

Total as at 31 December 2014


Total as at 31 December 2013

4 922 269

1 707 600

(a) Including shares subject to a three-year blocking period.


(b) The ratio is one option for one Nestl S.A. share.

148th Financial Statements of Nestl S.A.

163

25. Additional information requested by the Swiss Code of Obligations on remuneration

Shares and stock options ownership of the members of the Executive Board
and closely related partiesasat31December2014

Number of
shares
held (a)

Number of
options
held (b)

Paul Bulcke

637 173

1 392 000

Luis Cantarell

118 510

260 500

Jos Lopez

80 791

120 100

Laurent Freixe

55 761

108 700

Chris Johnson

30 298

125 400

Patrice Bula

87 051

101 800

Doreswamy (Nandu) Nandkishore

62 381

170 200

Wan Ling Martello

43 937

121 100

Stefan Catsicas

9 120

Peter R. Vogt

26 201

Martial Rolland

23 632

Heiko Schipper

4 240

Marco Settembri

David P. Frick
Total as at 31 December 2014
Total as at 31 December 2013

48 828

1 227 923

2 399 800

1 043 026

3 165 550

(a) Including shares subject to a three-year blocking period.


(b) The ratio is one option for one Nestl S.A. share.

For the detailed disclosures regarding the remunerations of the Board of Directors and
the Executive Board that are required by Swiss law, refer to the Compensation report of
Nestl S.A. with the audited sections highlighted with a blue bar.

164

148th Financial Statements of Nestl S.A.

Proposed appropriation of profit

In CHF
2014

2013

Retained earnings
Balance brought forward
Profit for the year

536 179 231

4 757 545

11 500 096 775

7 457 959 285

12 036 276 006

7 462 716 830

We propose the following appropriations:


Dividend for 2014, CHF 2.20 per share
on 3 199 349 195shares (a)
(2013: CHF 2.15 on 3 221 645 395 shares) (b)

Balance to be carried forward

7 038 568 229

6 926 537 599

7 038 568 229

6 926 537 599

4 997 707 777

536 179 231

(a) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (17 April
2015). No dividend is paid on own shares held by the Nestl Group. The respective amount will be attributed to the special
reserve.
(b) The amount of CHF63 565 399, representing the dividend on 29 565 302 own shares held at the date of the dividend
payment, has been transferred to the special reserve.

Provided that the proposal of the Board of Directors is approved by the Annual General
Meeting, the gross dividend will amount to CHF 2.20 per share, representing a net
amount of CHF 1.43 per share after payment of the Swiss withholding tax of 35%.
The last trading day with entitlement to receive the dividend is 17 April 2015. The shares
will be traded ex-dividend as of 20 April 2015. The net dividend will be payable as from
22 April 2015.

The Board of Directors


Cham and Vevey, 18 February 2015

148th Financial Statements of Nestl S.A.

165

Report of the Statutory Auditor


to the General Meeting of Nestl S.A.

As statutory auditor, we have audited the financial statements (income statement,


balance sheet and notes to the annual accounts on pages 153 to 165) of Nestl S.A. for
the year ended 31 December 2014.
Board of Directors responsibility
The Board of Directors is responsible for the preparation of the financial statements in
accordance with the requirements of Swiss law and the Companys Articles of
Association. This responsibility includes designing, implementing and maintaining an
internal control system relevant to the preparation of financial statements that are free
from material misstatement, whether due to fraud or error. The Board of Directors is
further responsible for selecting and applying appropriate accounting policies and
making accounting estimates that are reasonable in the circumstances.
Auditors responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit. We conducted our audit in accordance with Swiss law and Swiss Auditing
Standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on the
auditors judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers the internal control system relevant to the entitys preparation of
the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entitys internal control system. An audit also includes evaluating the appropriateness
of the accounting policies used and the reasonableness of accounting estimates made,
as well as evaluating the overall presentation of the financial statements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2014 comply
with Swiss law and the Companys Articles of Association.

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148th Financial Statements of Nestl S.A.

Report of the Statutory auditor

Report on other legal requirements


We confirm that we meet the legal requirements on licensing according to the Auditor
Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that
there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard
890, we confirm that an internal control system exists, which has been designed for the
preparation of financial statements according to the instructions of the Board of
Directors.
We further confirm that the proposed appropriation of available earnings complies
with Swiss law and the Companys Articles of Association. We recommend that the
financial statements submitted to you be approved.

KPMG SA

Scott Cormack
Licensed Audit Expert
Auditor in charge

Fabien Lussu
Licensed Audit Expert

Geneva, 18 February 2015

148th Financial Statements of Nestl S.A.

167

Notes

168

148th Financial Statements of Nestl S.A.